BIR Ruling [DA-406-03]

November 10, 2003 BIR RULING [DA-406-03] 175 184-95, DA-350-6-16-199 Roxas De Los Reyes Laurel & Rosario Law Offices 19/F 1st e-Bank Tower 8737 Paseo de Roxas Makati City Attention: Atty . Maria Portia E . Rosell Gentlemen : This refers to your letter dated December 14, 2000 requesting for a ruling that the issuance of the certificates of stock for the reclassified issued preferred "A" and "B" shares to common shares does not constitute an original issuance of shares of stock for purposes of documentary stamp tax pursuant to Section 175 of the Tax Code of 1997. It is represented that InteraDent Zahntechnik Philippines, Inc. is a domestic corporation duly registered with the Securities and Exchange Commission with the following capital structure: Common Stock Preferred Stock Total Authorized Capital Stock P18,000,000.00 P6,000,000.00 P24,000,000.00 A P2,000,000.00 B 2,000,000.00 C 2,000,000.00 Subscribed and Paid-up Capital Stock P9,137,010.00 A P1,607,400.00 12,363,310.00 B 1,618,900.00 C redeemed (now classified as treasury shares) that InteraDent Zahntechnik Gmbh owns 16,074 preferred "A" shares with a total par value of P1,607,400.00 and 16,189 preferred "B" shares with a total par value of P1,618,900.00; that under Article VII, Sections (a) and (b) of the Articles of Incorporation of InteraDent Zahntechnik Philippines, Inc., preferred "A" and "B" shares are convertible into common stock at any time after the date of issuance at such conversion value as may be mutually agreed upon by the shareholders of said company; that pursuant to said provisions, on June 12, 1997, the Board of Directors of InteraDent Zahntechnik Gmbh approved resolutions converting its preferred "A" and" "B" shares in InteraDent Zahntechnik Philippines, Inc. into common shares; that at separate meetings held on February 16, 1999 and March 1, 1999, the Board of Directors and Shareholders of InteraDent Zahntechnik Philippines, Inc. approved resolutions authorizing the conversion of 16,074 issued and outstanding preferred "A" shares and 16,189 issued and outstanding preferred "B" shares with a total par value of P3,226,300.00 issued in favor of InteraDent Zahntechnik Gmbh into P3,226,300.00 worth of common shares at a par value of One Peso (P1.00) per share and the amendment of Article VII of the former's Articles of Incorporation to reflect the aforesaid conversion; that on November 29, 2000, the Securities and Exchange Commission approved the amendment of Article VII of the Articles of Incorporation of InteraDent Zahntechnik Philippines, Inc.; that as a consequence of the aforesaid conversion of 16,074 preferred "A" and 16,189 preferred "B" shares into common shares, InteraDent Zahntechnik Philippines, Inc. will issue stock certificates covering 3,226,300 common shares with a total par value of P3,226,300.00 in favor of InteraDent Zahntechnik Gmbh; and that in support of your request, you submitted to this Office, the following documents: a) Amended Articles of Incorporation of InteraDent Zahntechnik Philippines, Inc.; and b) Capital Structure Summary and List of Shareholders before and after the conversion of the preferred shares into common shares as duly certified by the Corporate Secretary of InteraDent Zahntechnik Philippines, Inc. cDCHaS In reply thereto, please be informed that the conversion of the subject preferred shares into equivalent common shares does not partake of the issuance of original shares of stock, hence, the same is not subject to the documentary stamp tax imposed under Section 175 of the Tax Code of 1997. The re-classification of the shares from preferred shares into common shares of the stockholders in a corporation is not subject to the documentary stamp tax provided the new certificates are issued to the same stockholders and the par value is not higher than the replaced certificates. 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group