Income to be Received by CDC Holdings Sdn Bhd from investments in the Philippines in Loans, Stocks, Bonds or Other Domestic Securities, or from Interest on Its Deposits in Banks in the Philippines not subject to Philippine Income Tax and Consequently to Withholding Tax

February 14, 1996 BIR RULING NO. 013-96 28 (b) (8) (A) (ii) 000-00 013-96 Commonwealth Development Corporation One Bessborough Gardens London SWIV 2JQ Attention: Mr . R . G . Watkins Manager, Tax Department Gentlemen : This refers to your letter dated May 25, 1995 addressed to the Secretary of Finance, copy furnished this Office, requesting confirmation of your opinion that CDC Holdings Sdn Bhd may also be regarded as an instrumentality of the British Government, hence, exempt from income tax consequently from the withholding tax. cdti It is represented that CDC Holdings Sdn Bhd (CDCH for brevity) was incorporated in Malaysia in 1949 under the name, Borneo Abaca Ltd, engaged in the operation of plantations in Sabah until 1982 when the name was changed to BAL Estates Sdn Bhd which corporate name was later on changed during the same year (1982) to CDC Holdings Sdn Bhd; that the transfer of its entire business to Mostyn Estates Sdn Bhd was effected in exchange for new shares issued by the latter, representing 79.21% of the enlarged share capital of Mostyn Estates Sdn Bhd which changed its corporate name later to BAL Plantations Sdn Bhd; that the Commonwealth Development Corporation, (CDC), a financing institution owned or controlled by the British Government, increased its shareholdings in CDCH from 97.5% to 100%; that CDCH became an investment holding company in 1982, and as such, its first investment was 79.21% of the issued share capital of BAL Plantations Sdn Bhd, leaving a balance of 20.79% which is being held directly by CDC; that in 1990, CDCH acquired a 30% shareholding in Keresa Plantations Sdn Bhd, a rattan plantation company, and also a 100% shareholding in CDC (Sabah) Ltd., a dormant company; that a 25% shareholding was also acquired by CDCH in 1994 in Sarawak Oil Palms Bhd from CDC; that CDCH is presently considering the making of a number of equity investment in Indonesia, Bangladesh, Pakistan and Malaysia; that in 1982, CDCH has the immediate purpose of holding an investment in BAL Plantations Sdn Bhd; that a proposal was made in 1994 for the reorganization of CDC'S equity holdings in Malaysian plantation companies, and as a result of which CDCH was to hold CDC's equity investments in such companies; that a proposal was made to the effect that CDCH shall operate as an extension of CDC being able to invest only in the same enterprises and same countries as CDC is empowered to do; that the future purpose and operations of CDCH will be governed by the company's Investment Guidelines and Procedures, which are in consonance with those of CDC'S; that the Board of CDCH, composed of full-time employees of CDC, is responsible for ensuring the making of its investments and subsequent realizations as stated in the CDCH's Investment Guidelines and Procedures but larger investments will have to be referred to CDC; that CDCH is part of CDC's reporting requirements to the UK Government's Overseas Development Administration (ODA), CDC's sponsoring Ministry; that CDCH, as a wholly-owned subsidiary of CDC, may only raise or borrow money from CDC or another wholly-owned subsidiary of CDC unless a prior written approval is sought from the UK Secretary of State; that CDC may facilitate the approval sought by CDCH whenever necessary; and that for group accounting purposes, the revenue account and balance sheet of CDCH will be consolidated with those of CDC in the published accounts. In reply, please be informed that since CDCH is a wholly-owned subsidiary of CDC which is a British Government owned or controlled instrumentality, as earlier confirmed by then Secretary of Finance Cesar Virata in his letter dated November 9, 1977, this Office is of the opinion that CDCH should also be considered as a financing institution owned, controlled, or enjoying refinancing from the British government as contemplated in Section 28 (b) (8) (A) (ii) of the Tax Code, as amended. Accordingly, the income to be received by CDCH from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on its deposits in banks in the Philippines shall not be subject to Philippine income tax and consequently to the withholding tax. LLphil Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue