BIR Ruling [DA-407-06]

June 28, 2006 BIR RULING [DA-407-06] 24; DA-044-2004 Sycip Salazar Hernandez & Gatmaitan SSHG Law Centre, 105 Paseo de Roxas Makati City Attention: Atty. Hector M. De Leon, Jr. and Atty. Michael Geronimo G. Martin Gentlemen : This refers to your letter dated May 4, 2006 relative to the proposed transfer of shares from one trustee to another trustee, requesting exemption from the payment of capital gains tax and documentary stamp tax. It is represented that the Bank of the Philippine Islands (BPI) is a commercial banking corporation organized and existing under the laws of the Republic of the Philippines; that the Trust Department of BPI (BPI-Trustee) holds certain shares of stock as trustee under a Trust Settlement effective March 18, 1996 executed by the Mr. Jose Campos (Trustor) for the beneficiaries named therein; that Northwest Marine Drive Company Limited (NMDC) is a corporation organized and existing under the laws of the British Virgin Islands; that the Trustor has requested BPI-Trustee to transfer the Trust Shares to NMDC in the latter's capacity as trustee (NMDC-Trustee) for the same beneficiaries; that pursuant to a Change in Trustee, BPI-Trustee will transfer the Trust Shares to NMDC-Trustee (in NMDC-Trustee's capacity as trustee); that BPI-Trustee will also deliver the stock certificates representing the Trust Shares, duly endorsed by it, to NMDC-Trustee so that the same may be re-issued in NMDC's name as trustee; that this transfer of shares will be made without valuable consideration and will not result in any change in the beneficial owners of the Trust Shares; that the Trust Department of Deutsche Bank (DB-Trustee) also holds certain shares as trustee for the same beneficiaries; that pursuant to Change in Trustee, the DB-Trustee will transfer the Trust Shares to NMDC-Trustee; and that this transfer of shares will be made without valuable consideration and will not result in any change in the beneficial owners of Trust Shares. In reply thereto, please be informed that since there is no actual transfer of ownership over the aforementioned shares of stock as a result of the change of trustee from BPI-Trustee to NMDC-Trustee and from DB-Trustee to NMDC-Trustee under the Change of Trustee, the said transfer is not subject to capital gains tax under Section 24(D) of the Tax Code of 1997. Moreover, the Deed of Assignment is not subject to the documentary stamp tax under Section 196 of the same Code. However, the notarial acknowledgement is subject to the documentary stamp tax of P15.00 under Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-072-95 dated February 6, 1995 and 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. cAHITS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service