Herrera Teehankee & Cabrera Law Offices

August 6, 2009 BIR RULING [DA-(C-168) 441-09] 27 (D) (2); 176; 188; #031-99; DA-291-2005; DA-458-2006; DA-038-2007; DA-757-2006 Herrera Teehankee & Cabrera Law Offices 5/F SGV II Building, 6758 Ayala Avenue Makati City Attention: Atty. Mary Rogelyn T. Cabrera Gentlemen : This refers to your letter dated June 19, 2009 requesting on behalf of your client, Upbeam Investments, Inc. ("Upbeam") for confirmation of your opinion that the transfer and/or assignment of shares of stock in ABC Development Corporation ("ABC") by a trustee, DM Archer Ventures Corporation ("DM Archer") in favor of the real beneficial owner thereof, Upbeam, is not subject to the income and capital gains taxes imposed under Section 27 (A) and (D) (2) and to the documentary stamp tax under Section 175 both of the Tax Code of 1997, as amended. It is represented that on April 28, 2008, DM Archer, the registered owner of Nine Hundred One Thousand One Hundred Ninety Eight (901,198) common shares in ABC and Two Hundred Seventy One Thousand Four Hundred Thirty Six (271,436) preferred shares in ABC (collectively, the "Shares") executed a Declaration of Trust and Deed of Assignment (the "Declaration of Trust") in favor of Upbeam, which is the beneficial owner of the Shares; and that under the Declaration of Trust, DM Archer acknowledged and confirmed that: (1) the funds used to acquire the Shares were advanced by Upbeam; (2) the Shares were placed in the name of DM Archer as trustee for the benefit of Upbeam, the intent being that DM Archer shall appear as stockholder and will hold the Shares only for the benefit of and in trust for Upbeam; (3) DM Archer held the Shares in trust for Upbeam, which is the real beneficial owner of the Shares; (4) for and in consideration of the fact that the funds used to acquire the Shares were advanced by Upbeam, DM Archer assigned, transferred and conveyed the Shares to Upbeam. In reply, please be informed that while Section 27 (D) (2) of the Tax Code of 1997, as amended, generally imposes a final tax at the rates of 5% and 10% upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange, the rule does not apply in the instant case considering that there is no sale, barter or exchange of the shares of stock in ABC since Upbeam is the real owner of the Shares which DM Archer held as trustee. SEDICa Furthermore, in BIR Ruling No. 031-99 dated March 19, 1999, this Office has already ruled that ". . . the conveyance by the Trustee in favor of the Trustor of the subject properties which the former acquired by virtue of the Trust Agreement is not to be treated as another transfer separate and distinct from the sale between the original owner and the Trustee. The conveyance is merely to be treated as a continuation and confirmation of title in favor of the ultimate and real beneficiary of the subject properties." Thus, since the transfer of the Shares by DM Archer, as trustee, in favor of Upbeam, as trustor, is without monetary consideration and is merely a confirmation of title/ownership in favor of the beneficial owner, the same is not subject to the income and capital gains taxes imposed under Section 27 (A) and (D) (2) of the Tax Code of 1997, as amended. (BIR Ruling Nos. 031-99 dated March 19, 1999 and DA-291-2005 dated June 27, 2005) Moreover, the transfer of the aforesaid Shares is not subject to the documentary stamp tax imposed under Section 175 of the Tax Code of 1997, as amended by Republic Act No. 9243, but only to the documentary stamp tax on certificates under Section 188 of the same Code. (BIR Ruling No. DA-102-2001 dated June 1, 2001) DEScaT 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service