BIR Ruling [DA-451-05]

November 8, 2005 BIR RULING [DA-451-05] The Bengzon Law Firm 9th Floor, Ayala Life-FGU Center 6811 Ayala Avenue Makati City Attention: Atty. Manolito S. Soller and Atty. Anne Rose T. Estorco Gentlemen : This refers to your letter dated June 6, 2005 stating that your client, GLOBAL ISPAT HOLDINGS (SPV-AMC), INC. (GIHI), is a corporation duly organized and existing by virtue of the laws of the Philippines; that the primary purpose of GIHI is "[T]o invest in, or acquire Non Performing Assets (NPAs) of Financial Institutions (Fis)." that on the other hand, GLOBAL INFRASTRUCTURE HOLDINGS LIMITED (GIHL) is a non-resident foreign corporation duly organized and existing by virtue of the laws of the Isle of Man; that GIHL presently owns five hundred thousand (500,000) shares of stock partially paid in GIHI; that on March 4, 2005, the Financial Supervision Commission Isle of Man approved the change of name of GIHL to GLOBAL STEEL HOLDINGS LIMITED (GSHL); that at present, the shares of GSHL in GIHI's stock and transfer book are still registered under the company's former corporate name, GIHL; and that as a result of the change, GIHI would like to have the shares of GIHL registered under its new corporate name, GSHL. Based on the foregoing representations, you now request for ruling that the subsequent issuance of another stock certificate covering the same shares of stock to correctly reflect the company's change of name is not subject to capital gains tax and documentary stamp tax. In reply thereto, please be informed that in BIR Ruling No. DA256-01 dated December 5, 2001 , this Office had already occasioned to rule on the matter, when it said that ". . . the change in the company's name and the transfer of its registered office and place of effective management do not result in any sale, barter, exchange or other disposition of its shares of stock in MWCI and MWCHI. The company continues to be the owner of the MWCI and MWCHI shares. Accordingly, the registration of the company's MWCI and MWCHI shares under its new corporate name and registered office is not subject to capital gains tax pursuant to Section 28(B)(5)(c) of the Tax Code of 1997. The capital gains tax is imposed only on sale, barter, exchange or other disposition of shares of stock in a domestic corporation. "Since the change in the company's name and the transfer of its registered office and place of effective management do not result in any taxable sale or transfer of its shares of stock in MWCI and MWCHI inasmuch as the company continues to be the owner of the MWCI and MWCHI shares, it follows that the registration of the company's MWCI and MWCHI shares of stock under its new corporate name and registered office is not subject to documentary stamp tax under Section 176 of the Tax Code. The documentary stamp tax imposed under Section 176 of the Tax Code applies only when there is a sale or transfer of shares of stock resulting in a change in ownership. "Moreover, the issuance of new certificates of stock bearing the new name of the stockholder to replace prior or original certificates is not subject to documentary stamp tax since there is no change in ownership and provided that there is also no change in face value. However, it should be noted on the new certificate of stock that the proper documentary stamp has been affixed to the original, certificates. ( Sec. 15, Regulations No. 26) (BIR Ruling No. 051-84 dated March 6, 1984; and 3rd Indorsement to the Chief, Tobacco Division, dated March 29, 1971 ). AcCTaD "Accordingly, the Corporate Secretary of MWCI and of MWCHI may issue new certificates of stock of MWCI and MWCHI and register the same in the corresponding stock and transfer book under the company's new name (International Water (MWC) S.a.r.l.") and registered office to replace the old certificates of stock under the company's former name ("Ben MWSS Holdings, Inc.") without need of payment of any capital gains tax and documentary stamp tax by the company." Considering that the corresponding change of name does not create a new legal entity, but merely is the same corporation under a different name, the change of name did not result in any barter, sale, exchange or other disposition of its shares of stock in GIHI. Accordingly, the registration of the company's GIHI shares under its new corporate name, GSHL, is not subject to the capital gains tax and the corresponding documentary stamp tax respectively prescribed in Sections 28(B)(5)(c) and 175 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.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue