Samsung Electronics Philippines Manufacturing Corporation

February 17, 2009 BIR RULING [DA-(C-025) 090-09] Sec. 29; RR 2-2001; BIR Ruling 035-02 Samsung Electronics Philippines Manufacturing Corporation Block 6, Calamba Premiere International Park, Barangay Batino, Calamba City, Laguna Attention: Mr. Sang Ho Park Chief Financial Officer Gentlemen : This refers to your letter dated January 16, 2009 requesting, on behalf of BATINO REALTY CORPORATION (BRC), confirmation of your opinion that BRC is a publicly held corporation as defined under Revenue Regulations No. 2-2001, thus, exempt from the Improperly Accumulated Earnings Tax (IAET) imposed under Section 29 of the Tax Code of 1997. aIEDAC It is represented that BRC is a corporation duly organized and existing under Philippine laws with office address at the Calamba Premiere International Park-Special Economic Zone. It is engaged in the business of real estate. BRC is a subsidiary of SAMSUNG ELECTRONICS PHILIPPINES MANUFACTURING CORPORATION (SEPHIL), a corporation duly organized and existing under Philippine laws with office address at the Calamba Premiere International Park-Special Economic Zone. It is primarily engaged in the design, manufacture, and sale of electronic products, including optical disk drive products, their components and parts. SEPHIL maintains a trust to cover the retirement benefits of its 882 employees. This trust owns 59.7% of the shares of stocks of BRC. IcADSE BRC's equity structure, as shown in the latest General Information Sheet of the company, is as follows: Stockholder No. of Shares % of Ownership Banco de Oro as trustee 597 59.7% (SEPHIL Employees Retirement Fund) SEPHIL 398 39.8% Jeon Deug Kim 1 1% Sangho Park 1 1% Benjamin T. Bacorro 1 1% Aleli Militsala-Banol 1 1% Monette Eloisa C. Fabros 1 1% In reply, please be that * Section 29 (A) and (B) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-2001, provides that in addition to other taxes imposed by Title II of the Tax Code of 1997, there shall be imposed for each taxable year a tax equal to 10% of the improperly accumulated taxable income of corporations formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting the earnings and profits of the corporation to accumulate instead of dividing them among or distributing them to the shareholders. However, IAET shall not apply to, among others, publicly-held corporations. CIAHDT Domestic corporations not falling under the definition of a closely-held corporation are publicly-held corporations. Under Section 4 of Revenue Regulations No. 2-2001, "closely-held corporation" is defined as a corporation where 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. For purposes of determining whether the corporation is a closely-held corporation, it is provided that 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. Therefore, the ownership of a corporation (like BRC) for purposes of determining whether it is a closely held corporation or a publicly held corporation is ultimately traced to the individual participants or beneficiaries of the trust. Thus, where at least 50% of the outstanding capital stock or 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 at least 21 or more individuals, the corporation is considered publicly-held corporation as the term is defined under the cited Revenue Regulations No. 2-2001. Applying the foregoing and considering that 59.7% of BRC's shareholdings are held by BDO in trust for the 882 beneficiaries of SEPHIL Employees Retirement Fund, it follows that BRC is not a closely-held corporation and therefore exempt from IAET. This ruling is being issued in the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts as represented are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service