Imperial Resources, Inc.

October 24, 2007 BIR RULING [DA-565-07] DA 326-05 Imperial Resources, Inc. 42-J, 4th Street, New Manila Quezon City Attention: Atty. Manolito S. Soller Legal Counsel Gentlemen : This refers to your letter dated August 7, 2007 stating that Imperial Resources, Inc. (Imperial) is a corporation whose securities are registered under the Securities and Regulations Code and also listed in the Philippine Stock Exchange; that it is currently and primarily engaged in the business of operating coal mines, and of prospecting, exploration of mining, milling, concentrating, converting, smelting, treating, refining, preparing for market, manufacturing, buying, selling, exchanging, and otherwise producing, and dealing in all kinds of ores, metals and minerals, asphalt-bithumen, hydrocarbons, acids and chemicals, and in the products and by-products thereof; that on December 16, 1999, at least a majority of the Board of Directors of Imperial approved the amendment of its Capital Stock by increasing its par value from P0.01 to P5.00 and at the same time decreasing the number of shares at a ratio of five hundred (500) shares to one (1) share, thereby maintaining the amount of authorized and outstanding capital stock; that an amended articles of incorporation was prepared containing the above resolution of the board and was ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock in a meeting duly called for such purpose on May 25, 2000, conformably with Section 16 of the Corporation Code of the Philippines; that such amended articles of incorporation was likewise approved by the Securities and Exchange Commission (SEC) on September 15, 2000; that as a result of the increase in par value and a corresponding decrease in number of authorized capital stock, it is now necessary to replace all the stock certificates now in the hands of all stockholders with new ones so that the correct number of shares held and the par value thereof shall be reflected therein; that in replacing the stock certificates, there would be no transfer of ownership or intention to transfer the same as they are just replacements thereof; and that as of even date, there are more than a thousand stockholders of record and all of them were issued the requisite stock certificates. TCDHIc Based on the foregoing representations, you now request for confirmation of your opinion that no gain or loss shall be recognized on the replacement of stock certificates to reflect the correct number of shares and par value thereof as a result of the amendment to the articles of incorporation, neither is it subject to documentary stamp tax and donor's tax. In reply thereto, please be informed that in BIR Ruling No. 096-96 dated September 3, 1996 , this Office had already occasioned to rule on the matter, when it said that ". . . since the transaction is without any monetary consideration, and considering further that for the foregoing reasons, there is actually no transfer of ownership of the share or even a portion thereof, the issuance by the Corporate Secretary of the Club of a replacement stock certificate in the name of its true owner, . . ., is not subject to capital gains tax imposed under Section 21(d) of the Tax Code, as amended. ESTDIA Likewise, the replacement of Stock Certificate is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code, as amended, but only to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code, as amended by Republic Act No. 7660." The same rule was reiterated in BIR Ruling No. DA216-04 dated April 21, 2004 , which held that "In the instant case, the surrender of the certificates of stock by the stockholders of ECPI is a necessary consequence of the decrease in the capital stock of the said corporation. Thus, in order to reflect the corrected number of shares therein, it is required that the stockholders of record should transfer and surrender their old certificates of stock to the corporation, without any monetary consideration, but only for the purpose of replacing the old stock certificates into new ones. In other words, there is no effective transfer of beneficial ownership over the said shares. Such being the case, the replacement of stock certificates is not subject to capital gains tax imposed under Section 127(A) of the Tax Code of 1997 nor to the documentary stamp tax prescribed in Section 176 of the Tax Code." SDHAEC Finally, the replacement of stock certificates is not subject to gift tax since there is no intention to donate on the part of any of the parties and the transaction is effected purely for business reasons." Inasmuch as the above-cited rulings are in all fours similar to the instant case, this Office hereby confirms your opinion that no gain or loss shall be recognized on the replacement of stock certificates to reflect the correct number of shares and par value thereof as a result of the amendment to the articles of incorporation nor is it subject to documentary stamp tax prescribed in Section 176 of the Tax Code of 1997, as amended, and donor's tax imposed under Section 99, supra . 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. ADETca Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service