Pastrana Fallar

July 23, 2007 BIR RULING [DA-406-07] DA 088-06 Pastrana Fallar 1603 Antel Corporate Center 121 Valero Street, Salcedo Village Makati City Attention: Atty. Teodoro A. Pastrana and Atty. Mary Jane A. Delgado Gentlemen : This refers to your letter dated May 23, 2007 stating that your client, Synovate, Inc. (Synovate), is a domestic corporation duly existing under Philippine laws and was duly registered with the Securities and Exchange Commission (SEC) on July 15, 1998; that it is primarily engaged in the business of management consultancy; that its head office is located at 1701 West Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City; that it has an authorized capital stock of P8,157,600.00 with par value of P1.00 per share fully issued and outstanding; that Synovate is a wholly-owned subsidiary of Synovate (Asia Pacific-BVI) Limited [BVI], a corporation existing under the laws of British Virgin Islands; that on the other hand, BVI is a wholly-owned company of Synovate Holdings BV (Holdings), a corporation existing under the laws of the Netherlands; that Synovate, BVI and Holdings are all part of Synovate Far East Group; that currently, the 8,157,600 Synovate outstanding shares are registered under the name of BVI; that in view of the corporate reorganization of the Synovate Far East Group, it is envisioned that the entire Synovate shares will be transferred from BVI to Holdings; that said corporate reorganization will entail, among others, the liquidation of BVI, resulting therefore, in Holdings becoming the direct shareholder of the Synovate outstanding shares in contrast to the current situation where Holdings appears merely to 'indirectly' own the Synovate shares, Holdings being the ultimate parent of BVI; that incidentally, BVI was previously owned by Synovate (Asia Pacific) BV (BV), a corporation incorporated in the Netherlands which was, in turn, previously owned by Holdings; and that considering that BV and Holdings were merged on December 30, 2006 wherein Holdings was the surviving corporation, the latter became the direct shareholder of BVI. Based on the foregoing representations, you now request confirmation of your opinion that the proposed transfer of Synovate shares from BVI to Holdings pursuant to a legitimate Asian corporate reorganization and without consideration is not subject to capital gains tax and donor's tax. In reply thereto, please be informed that this Office had already occasion to rule on the matter, when it said in BIR Ruling No. DA088-06 dated March 6, 2006, that ". . . the proposed transfer of the TPC shares from TTC to THBV, pursuant to a worldwide corporate reorganization of The Thomson Group of Companies, is not subject to capital gains tax as (1) there is no effective transfer of beneficial ownership of the TPC shares since both Transferor and Transferee belong to The Thomson Group of Companies and (2) the proposed transfer is a mere re-alignment of stockholdings effectively consolidating beneficial and legal ownership of the TPC shares. Since there is no transfer of beneficial ownership, no gain will be realized by TTC and THBV for income tax purposes. xxx xxx xxx The proposed transfer of the TPC shares will be made primarily for business considerations, i.e., in connection with a worldwide corporate reorganization and to consolidate beneficial and legal ownership into the Transferee. Thus, the proposed transfer to be made without consideration is not subject to donor's tax since there is no donative intent that can be attributed to the Transferor. TAIcaD Furthermore, both the Transferor and the Transferee are subsidiaries and part of The Thomson Group of Companies and there is no transfer of beneficial ownership of the TPC shares. . . . there can be no donative intent on the part of the transferor in a transfer of properties to the member-beneficiaries, considering that a person or entity cannot donate properties the ownership of which belongs to themselves. ( BIR Ruling No. DA318-99 dated May 21, 1999 ) xxx xxx xxx IN VIEW OF THE FOREGOING, this Office hereby confirms your opinion that the proposed transfer of Synovate shares from BVI to Holdings pursuant to a legitimate Asian corporate reorganization and without consideration is not subject to capital gains tax and donor's tax. However, the transfer of Synovate shares from BVI to Holdings shall be subject to documentary stamp tax imposed under Section 4 of Revenue Regulations No. 13-2004, implementing Section 176 of the Tax Code of 1997. 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