Quiason Makalintal Barot Torres & Ibarra

July 2, 2007 BIR RULING [DA-354-07] 27; 196; DA-044-2004; DA-050-2002 Quiason Makalintal Barot Torres & Ibarra 21st Floor, Robinsons-Equitable Tower 4 ADB Avenue Corner Pedro Poveda Street 1605 Ortigas Center, Pasig City Attention: Attys. Ruelito Q. Soriano And Rodolfo V. Reyno III Gentlemen : This refers to your letter dated May 10, 2007 requesting on behalf of your client, PET Plans, Inc. (the "Company") for a ruling on the exemption from capital gains and documentary stamp taxes on the transfer of certain real properties held in trust by one bank to another. Background The Company is a Philippine corporation duly registered with the Securities and Exchange Commission ("SEC"), and engaged in the sale of various pre-need plans to its clients. Under the SEC Revised Rules on Registration and Sale of Pre-Need Plans ("Revised Rules"), the Company is required to establish a trust fund wherein a certain percentage of the proceeds from the sale of pre-need plans are deposited in order to guarantee the future payment of benefits to its planholders. Under Rule 16.1 of the Revised Rules, "to guarantee the delivery of benefits such as monetary consideration, cost of services rendered or property delivered, deposits shall be made by the issuer [the Company] into a Trust Fund to be established for each type of plan in accordance with the rates used in actuarial studies submitted . . . ." In compliance with this SEC regulation, some of the Company's assets, consisting of real properties, are maintained in various trust accounts, ownership thereof being vested in the following banks, as follows: TaISEH Property & Location TCT/CCT No. Tax Dec. No. Name of Trustee/Owner General Santos City T-68527 47692 PCIBANK Education Trust T-68528 Account # 210-50428-6 Ciudad Adelina, Trece T-40983 1573-R PCIBANK Education Trust Martires, Cavite T-40982 1574-R Account # 210-504286-6 Tacurong, Sultan T-38864 99 002 02759 PCIBANK Education Trust Kudarat Account # 210-504286-6 Las Villas De Manila, T-274270 05430 PCIBANK TA # 210-50428-6 Bian, Laguna T-274344 05447 and PCIBANK Pension TA # T-274346 05449 210-50438-4 T-274347 05450 T-274348 05451 T-274349 05452 T-274379 05456 T-274389 05458 T-285879 05461 T-285902 05571 T-285901 05598 61164 Marbel, Koronadal T-60710 4825-B PCIBANK Pension TA # 210- T-60711 4816-B 50438-4 Pueblo De Oro, T-138457 47932 PCIBANK Education Trust Cagayan de Oro City Account # 210-504286-6 Davao City T-247213 E-01-038-033061 PCIBANK Education Trust Account # 210-504286-6 PCIB Galleria, Pasig PT-30661 E-001-00012 PCIBANK Education Trust City Account # 210-504286-6 EL Tower 17/F, CCT-75822 02041 PCIBANK Pension TA # 210- Makati City CCT-75823 02042 50438-4 EL Tower 22/F, CCT-70763 E-016-02118 PCIBANK Pension TA # 210- Makati City CCT-70764 E-016-02119 50438-4 EL Tower 23/F, CCT-70765 E-016-02120 PCIBANK Pension TA # 210- Makati City CCT-70766 E-016-02121 50438-4 EL Tower 25/F, CCT-70769 E-016-02124 ING Bank Education TA # 2C- Makati City CCT-70770 E-016-02125 0002-2 Cebu Holdings, Unit CCT-1415 GR2K-04-026-02431 PCIBANK Pension TA # 802-803, Cebu City CCT-1416 GR2K-04-026-02430 210-50438-4 World Center, Unit CCT-53245 E-002-13478 PCIBANK Pension TA # 210- 16B, Makati City CCT-53246 E-002-13477 50438-4 Each property is further covered by a trust agreement which specifically establishes the trust fund for the benefit of present and future holders of the pre-need plans. Although the Banks, as trustees, have the power to hold, manage, administer and invest the Trust Fund, they do so only for the interest and benefit of the planholders. Beginning March 2006, however, the Company has discontinued selling new plans following a dwindling collection on previously sold plans. Since then, the Company has been undergoing rehabilitation. In view of these and for purposes of administration, it proposed the transfer of all of the Company's existing trust accounts covering the above-mentioned real properties with Equitable PCI Bank ("Equitable") and ING Bank ("ING") to the Bank of the Philippine Islands ("BPI"). Under its Modified Rehabilitation Plan, the Company intends to consolidate all of its trust accounts into a single trust account with BPI, since the latter has also been selected as the sole Investment Fund Manager in its petition for rehabilitation filed in court. It is viewed that the consolidation of the trust funds to BPI will not only minimize the effects of business contraction but will also enable the Company to take advantage of critical mass, and will further facilitate the conversion of its trust fund into a mutual fund as part of its rehabilitation plan. cIECTH Consequently, the Company is arranging the transfer of the above-mentioned real properties held in trust with various banks as original trustee, to BPI as the successor trustee, executing Deeds of Assignment in the latter's favor. The Board of Directors of the Company has already unanimously approved the appointment of BPI as the sole surviving trustee for these trust accounts. In view thereof, you now seek for a confirmatory ruling on the tax consequences of the change of trustee of PET Plans, Inc. from Equitable and ING to BPI, particularly that: 1. no income or gain will be recognized on the transfer of titles over the real properties from Equitable and ING to BPI, and therefore not be subject to any income or capital gains tax; and 2. the execution of Deeds of Assignment pursuant to the transfer will also not be subject to documentary stamp tax. In reply thereto, please be informed that since there is no actual transfer of ownership over the aforementioned real properties as a result of the change of trustee from Equitable and ING to BPI under a Deed of Assignment, the said transfer is not subject to income or capital gains tax under Section 24 (D) of the Tax Code of 1997, as amended. Moreover, the Deeds of Assignment are not subject to the documentary stamp tax under Section 196 of the same Code. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 under Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-044-2004 dated February 4, 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service