Quisumbing Torres

September 14, 2007 BIR RULING [DA-492-07] Sections 24 (D) (1) & 196 DA-435-2000 dtd. 12/18/00 Quisumbing Torres 12/F Net One Center 26th St. cor. 3rd Ave., Crescent Park West Bonifacio Global City, Taguig Attention: Dennis G. Dimagiba & Roy N. Relato Counsels Gentlemen : This refers to your letter dated January 16, 2007, requesting in behalf of your client, DERECK HOLLEY, a confirmation of your opinion that the transfer of the 400,000 shares of stock of eTelecare Global Solutions, Inc. of which he is a stockholder to Ms. Dunton by virtue of the Divorce Decree, is not subject to any Philippine tax, including the capital gains, documentary stamps and donor's taxes. It is represented that Mr. Derek Holley is a US national of the United States of America (USA); that in 1996, Mr. Holley was married to Ms. Bridget Dunton, also a US national in California, USA; that both are non-residents; that during their marriage, Mr. Holley became a stockholder of eTelecare Global Solutions, Inc. (formerly: eTelecare International, Inc.) ("Company"), a Philippine company that he and other parties organized pursuant to a Joint Venture Agreement; that in January 2000, Mr. Holley subscribed to P150,000 shares of the Company upon incorporation; that said shares grew to 600,000 shares pursuant to a 3:1 stock dividend declared by the Board of Directors of the Company on November 12, 2003; that under Philippine laws and the laws of the USA, the shares of stock in the company that are issued in the name of Mr. Holley during their marriage are held in common by the spouses as conjugal partnership property; that on September 25, 2004, the Spouses obtained a divorce in the USA; that the Divorce Decree awarded Ms. Dunton a total of P100,000 shares of the original 150,000 shares that are currently recorded in the name of Mr. Holley, as part of Ms. Dunton's share in the conjugal partnership properties; that accordingly, the total number of shares that Ms. Dunton legally owns (but are currently recorded in the Company's Stock and Transfer Book in the name of Mr. Holley) is 400,000 shares; that by virtue of the Divorce Decree, Mr. Holley is legally bound to transfer the 400,000 shares of stocks in the Company that are currently issued in his name to Ms. Dunton, as part of the latter's share in the conjugal partnership properties. In reply, please be informed that no donation had taken place when former spouses, as in this case, appropriated to themselves the properties which belong to their community property as a consequence of the liquidation of the partnership and adjudication for their own individual and separate ownership the properties which, from the celebration of their marriage, rightfully belong to them equally. (BIR Ruling No. 220-83 dated December 8, 1983) aHcACT In the instant case, since the parties merely appropriated to themselves their respective shares in the community property, such appropriation by virtue of the Divorce Decree of the 400,000 shares of stocks to Ms. Dunton is not subject to donor's tax, since Mr. Holley did not donate the 400,000 shares of stocks to Ms. Dunton. There is no donative intent in the instant case. Moreover, the transfer of the 400,000 shares of stock to Ms. Dunton by Mr. Holley pursuant to the Divorce Decree is not subject to capital gains tax, as such transfer is equivalent to a conveyance but without any monetary consideration, made in compliance with the Court's decision granting parties the appropriation of their communal properties. Neither, is the transfer subject to documentary stamp tax since the monetary consideration in the conveyance from which the tax shall be based is wanting. Accordingly, the transfer of the 400,000 shares of stock owned by Mr. Holley in the Company to Ms. Dunton by virtue of the Divorce Decree is exempt from the imposition of capital gains, documentary stamp and donor's taxes. EDIaSH 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