BIR Ruling [DA-490-03]

December 10, 2003 BIR RULING [DA-490-03] 29; DA-203-2002 Vision Insurance Consultants, Inc. Chemphil Building 851 Arnaiz Avenue, Legaspi Village 1229 Makati City Attention: Ms. Imelda L Sebastian Vice President Finance and Mr. Reynaldo C. Rafael Senior Manager Legal Gentlemen : This refers to your letter dated October 10, 2001 stating that your company, Vision Insurance Consultants, Inc., has 1,843,750 issued and outstanding shares owned by twelve (12) individual shareholders and four (4) corporate shareholders, as enumerated below: Vision Insurance Consultants, Inc. 1. Carlos N. De Castro 1 share 2. Albert Del Rosario 1 share 3. Antonio M. Garcia 1 share 4. Eusebio M. Garcia 1 share 5. Juan Manuel M. Garcia 1 share 6. Ramon M. Garcia 1 share 7. Oscar Malinis 1 share 8. Rolando P. Navarro 1 share 9. Ana Maria G. Ordoveza 1 share 10. Jose Ma. L. Ordoveza 1 share 11. Rex Rico 1 share 12. Carmelita G. Salgado 1 share 13. Chemholdings Corp. 371,698 shares 14. Ferro Chemicals, Inc. 371;696 shares 15. Phil Indochem Corp. 728,647 shares 16. Phil. Minerals and Alloy Ventures Corp. 371,696 shares Total 1,843,750 shares ============= that Phil. Indochem Corp. and Phil. Minerals and Alloy Ventures Corp., with a combined stake of 1,100,343 shares (representing more than fifty percent (50%) of the total issued and outstanding shares of Vision Insurance Consultants, Inc.), have eleven (11) individual shareholders and no corporate shareholders, namely: Phil Indochem Corp. (PIC) 1. Jesus N. Alcordo 2. Cesar M. Dela Cruz 3. Santiago S. Navarro 4. Ana Maria G. Ordoveza 5. Jose Ma. L. Ordoveza Phil. Minerals and Alloy Ventures Corp. (PMAVC) 1. Carlos N. De Castro 2. Manuel N. De Castro 3. Anastacio Escubit 4. Virgilio C. Jordana 5. Oscar E. Malinis 6. Aristarco R. Navarette that in addition, Ferro Chemicals, Inc. and Chemholdings Corp. have the following individual shareholders: Ferro Chemicals, Inc. (FCI) 1. Ramon M. Garcia 2. Loo Zun Chua 3. Daniel Chua Chun Liong 4. Samuel Chuason 5. Loo Chun Tek 6. Antonio Pineda Chemholdings Corp. (CC) 1. John Alcordo 2. Antonio M. Garcia 3. Alexandra Garcia 4. Jaime Y. Gonzales 5. Suwito Tkojro and that as a recapitulation, Vision Insurance Consultants, Inc. has the following individual shareholders owning directly or indirectly more than fifty percent (50%) in value of the outstanding capital stock or of the total combined voting power of all classes of stock of Vision Insurance Consultants, Inc.: ASEIDH 1. Jesus Alcordo (indirectly PIC) 2. John Alcordo (indirectly CC) 3. Loo Zun Chua (indirectly FCI) 4. Daniel Chua Chun Liong (indirectly FCI) 5. Samuel Chuason (indirectly FCI) 6. Loo Chun Tek (indirectly FCI) 7. Carlos N. De Castro (directly; indirectly PMAVC) 8. Manuel N. De Castro (indirectly PMAVC) 9. Cesar M. Dela Cruz (indirectly PIC) 10. Albert Del Rosario (directly) 11. Anastacio Escubit (indirectly PMAVC) 12. Alexandra Garcia (indirectly CC) 13. Antonio M. Garcia (directly; indirectly CC) 14. Eusebio M. Garcia (directly) 15. Juan Manuel M. Garcia (directly) 16. Ramon M. Garcia (directly; indirectly FCI) 17. Jaime Y. Gonzales (indirectly CC) 18. Virgilio C. Jordana (indirectly PMAVC) 19. Oscar Malinis (directly; indirectly PMAVC) 20. Rolando P. Navarro (directly) 21. Santiago S. Navarro (indirectly PIC) 22. Aristarco R. Navarette (indirectly PMAVC) 23. Antonio Pineda (indirectly FCI) 24. Ana Maria G. Ordoveza (directly; indirectly PIC) 25. Jose Ma. L. Ordoveza (directly; indirectly PIC) 26. Rex Rico (directly) 27. Carmelita G. Salgado (directly) 28. Suwito Tkojro (indirectly CC) Based on the foregoing representation, you now request for a confirmation of your opinion that Vision Insurance Consultants, Inc. is exempt from the provision of Section 29 of the Tax Code of 1997. In reply, please be informed that Section 4 of Revenue Regulations No. 2-2001 implementing Section 29 of the Tax Code of 1997 on Improperly Accumulated Earnings Tax provides, viz: ". . . closely-held corporations are those corporations at least fifty percent (50%) in value of the outstanding capital stock or at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than twenty (20) individuals. Domestic corporations not falling under the aforesaid definition are, therefore, publicly-held corporations. For purposes of determining whether the corporation is a closely held corporation, insofar as such determination is based on stock ownership, the following rules shall be applied: (1) Stock Not Owned by Individuals. Stock owned directly or indirectly by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by its shareholders, partners or beneficiaries . . ." Moreover, improperly accumulated earnings tax shall not apply to publicly-held corporations pursuant to Section 29 of the Tax Code of 1997. The ownership of a domestic corporation for purposes of determining whether it is a closely-held corporation or a publicly-held corporation is ultimately traced to the individual shareholders of the parent company. Thus, where at least 50% of the total combined voting power of all classes of stock entitled to vote in a corporation is owned directly or indirectly by more than 20 individuals, the corporation is considered a publicly-held corporation. Ultimately, the question of whether Vision Insurance Consultants, Inc. is a publicly-held corporation, depends on whether at least 50% of said corporation is owned by more than 20 individuals. This is a question of fact, which is not a proper subject of a legal ruling. The proper function of a ruling is to interpret the tax laws and not to determine questions of fact. Accordingly, if Vision Insurance Consultants, Inc. can show that it is a publicly-held corporation, it will not be subject to the improperly accumulated earnings tax. 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