Ramon F. Garcia & Company

June 20, 2007 BIR RULING [DA-341-07] Ramon F. Garcia & Company 30/F Burgundy Corporate Tower 252 Sen. Gil Puyat Avenue Makati City Attention: Nhorie L. Paguio Gentlemen : This refers to your letter dated November 22, 2006 requesting for clarification on the correct tax rate of documentary stamp tax to be imposed on the tax free exchange transaction executed by Spouses Pablo G. Perez and Encarnacion SL. Perez in favor of Sanper Realty and Development Corporation in exchange for the latter's shares of stock. It appears that the BIR through Certification SN: 011-2004 dated January 22, 2004 exempted the aforesaid transaction from the payment of following taxes: income tax, capital gains tax, expanded withholding tax, donor's tax and value-added tax; that the documentary stamp tax on the transfer of real properties in the amount of P415,350.00 had been paid as evidenced by Land Bank of the Philippines Deposit Slip dated June 17, 2004; that however, the documentary stamp tax due on the original issuance of shares had not yet been paid; that the Securities and Exchange Commission (SEC) approved the said transaction last October 17, 2006 with a condition that within 90 days the company should present the titles of the properties transferred already in the name of the company; that the company immediately processed the application for Certificate Authorizing Registration (CAR) to transfer ownership of the properties and pay the documentary stamp tax on the original issuance of shares; that however, during this time the tax rate for the documentary stamp tax on original issuance of shares has been amended by virtue of Republic Act (RA) No. 9243; and that as a consequence, the company paid the documentary stamp tax on the original issuance in the amount of P50,000.00 based on the current tax rate of P1.00 on each P200.00. aSDCIE In reply thereto, please be informed that Section 3 of Revenue Regulations No. 13-2004, implementing Republic Act (RA) No. 9243, provides "SEC. 174. Stamp Tax on Original Issue of Shares of Stock . On every original issue, whether on organization, reorganization or for any lawful purpose, of shares of stock by any association, company or corporation, there shall be collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the par value, of such shares of stock: Provided, that in case of the original issue of shares of stock without par value, the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration for the issuance of such shares of stock: Provided, further, That in the case of stock dividends, on the actual value represented by each share." In the case of Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc. (L-68230, November 25, 1986, 145 SCRA 671) , the Supreme Court ruled that ". . . the documentary stamp tax on original issues of certificates of stock attaches upon acceptance of the stockholder's subscription in the capital stock of a corporation regardless of the physical issuance and delivery to the stockholder of the Certificate of Stock evidencing his stockholdings . . . ." In the instant case, the subscriptions of the above-named spouses, in exchange for the shares of stock of Sanper Realty and Development Corporation, are deemed accepted only by the aforesaid corporation, upon approval by the SEC on October 17, 2006 of the application for the certificate of registration or application for the increase in authorized capital stock of the said company. Inasmuch as in October 2006, R.A. No. 9243, as implemented by Revenue Regulations No. 13-2004, was already effective thus reducing the tax rate for original issuance of shares from P2.00 to P1.00 for every P200, this new tax rate shall be applicable to the payment made by Sanper Realty and Development Corporation for the issuance of the shares of stock in favor of Spouses Perez pursuant to Section 40 (C) (2) and (6) (c) of the Tax Code of 1997. AaHDSI SUCH BEING THE CASE, this Office holds that Sanper Realty and Development Corporation is indeed correct in computing the documentary stamp tax on the original issuance of shares based on the new rate provided in R.A. No. 9243, as implemented by Revenue Regulations No. 13-2004. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service