Picazo Buyco Tan Fider & Santos

December 7, 2007 BIR RULING [DA-626-07] Sec. 84 & 87 (D) Picazo Buyco Tan Fider & Santos 17th, 18th & 19th Floors, Liberty Center 104 H.V. dela Costa St., Salcedo Village Makati City Attention: Attys. Antonio A. Picazo & Noel A. Beltran Gentlemen : This refers to your letter dated November 30, 2005 requesting exemption from the payment of estate tax on the transfer of the portion of the estate of Ms. Blanche Eva de Vere Booten situated in the Philippines in favor of the Royal National Lifeboat Institution ("RNLI"), a charitable institution based in the United Kingdom. DSITEH It is represented that Ms. Blanche Eva de Vere Booten, a British citizen and domiciliary of Hong Kong at the time of her death, died in Hong Kong on April 1, 1992; that the administrator of her estate, the Bermuda Trust (Hong Kong) Limited [now, HSBC Private Trustee (Hong Kong) Limited, following the acquisition by HSBC Holdings plc. of the Bank of Bermuda Ltd.], found out that the decedent left some listed Philippine shares consisting of 2,898 shares of the capital stock of the Philippine Long Distance Telephone Company (the "PLDT Shares"), 456 shares of the capital stock of the Bogo-Medellin Milling Company, Inc. (the "Bogo-Medellin Shares") and 13 shares of the capital stock of the Baguio Gold Holdings Corporation (the "Baguio Gold Shares") (together, the "Philippine Shares"), thus, the need to institute probate proceedings in the Philippines in order to dispose of the Philippine Shares in accordance with the decedent's will; that the Philippine Shares were not specifically bequeathed or devised to any legatee or devisee, hence, falling under the category of "the balance or other assets not specifically bequeathed to specific legatee or devisee" of which the net proceeds from the sale thereof shall go to RNLI pursuant to the provisions of the will of the decedent; that no part of RNLI's net income inure to the benefit of any individual; that not more than thirty percent (30%) of all transfer made to RNLI shall be used by it for administration purposes; and that RNLI submitted an Undertaking dated April 24, 2007, wherein it committed to provide to the BIR certified true copies of its Annual Review Report and Accounts from the time it received the above legacy until such time the same is fully expended, to ensure that the preceding condition is being completely and faithfully complied with. In reply, please be informed that Section 87 (D) of the 1997 Tax Code, as amended, provides viz.: "SEC. 87. Exemption of Certain Acquisitions and Transmissions . The following shall not be taxed: xxx xxx xxx (D) All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions, no part of the net income of which inures to the benefit of any individual: Provided, however , That not more than thirty percent (30%) of the said bequests, devises, legacies or transfers shall be used by such institutions for administration purposes." (Emphasis supplied) SEAHcT Based on the foregoing and considering that no part of RNLI's net income inure to the benefit of any individual and that not more than thirty percent (30%) of all transfer made to RNLI shall be used by it for administration purposes, the transfer of the Philippine Shares to RNLI, therefore, is not subject to the estate tax imposed under Section 84 of the Tax Code of 1997, as amended. This grant of exemption, however, is subject to the condition that RNLI shall abide by its undertaking to furnish the BIR certified true copies of its Annual Review Report and Accounts from the time it received the above legacy until such time the same is fully expended, for purposes of monitoring that the conditions above set forth are being completely and faithfully complied with. 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, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. HTaSEA Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service