Whether the Effective Date of Merger is the Date Provided in the Plan of Merger or the Date of SEC Approval

August 12, 2002 BIR RULING NO. 032-02 40 (C) (6) (b) 52 (C) 000-00 SGV & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty. C. P. Noe l Tax Division Gentlemen : This refers to your letter dated May 15, 2002, in supplement to your letter dated April 24, 2002 where you requested for a ruling on behalf of your client, BASF Philippines, Inc. (BASF for brevity), that the merger between BASF and Cyanamid Agricultural Products Philippines, Inc. (CAPPI) with BASF as the surviving corporation is a tax-free merger under Sections 40(C)(2) and (b) and 40(C)(6)(b) of the Tax Code of 1997. It is represented that BASF and CAPPI, both domestic corporations, agreed to merge under the provisions of the Corporation Code; that their Plan of Merger provides, among others, that the effective date of merger shall be June 30, 2002; that on such date, CAPPI shall be deemed merged into and become part of BASF and the separate existence of CAPPI shall thereupon cease by operation of law by virtue of and as provided in Section 80 (2) of the Corporation Code; that the Securities and Exchange Commission (SEC) duly approved the merger of BASF and CAPPI, with BASF as the surviving corporation, on April 30, 2002. On April 25, 2002, you filed with our Office, a request for a confirmatory ruling that the merger of the two corporations is considered a tax-free merger under Sections 40(C)(2) and (b) and 40(C)(6)(b) of the 1997 Tax Code; that thereafter, on May 16, 2002, you filed a supplement to your earlier letter requesting for an opinion on which date the merger took effect, i.e. , June 30, 2002 as provided in the Plan of Merger or April 30, 2002, the date of approval of the SEC, for purposes of compliance with BIR reportorial requirements that includes filing of notice of merger and short-period return. On May 31, 2002, you filed with the SEC a request for written confirmation on the effective date of merger between BASF and CAPPI. In a letter dated June 27, 2002, the SEC confirmed that June 30, 2002 is the effective date of merger between BASF and CAPPI taking into consideration that the SEC has already approved the Articles and Plan of Merger of BASF and CAPPI with June 30, 2002 as the effective date thereof. Based on the foregoing, you now request for our opinion on which date shall be considered as the effective date of merger, the date provided in the Plan of Merger (June 30, 2002) or the date of approval of the SEC (April 30, 2002), for purposes of compliance with BIR reportorial requirements such as filing of notice of merger and short term period return under Section 52(C) of the 1997 Tax Code. In reply, please be informed that for purposes of compliance with BIR reportorial requirements on merger, the general rule is that the effective date of merger shall be the date of approval by the SEC of the Articles and Plan of Merger pursuant to Section 79 of the Corporation Code which states that: "Section 79. Securities and Exchange Commission's approval and effectivity of merger or consolidation . The articles of merger or of consolidation, signed and certified as herein above required, shall be submitted to the Securities and Exchange Commission in quadruplicate for its approval: Provided , That in the case of merger or consolidation of banks or banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions and other special corporations governed by special laws, the favorable recommendation of the appropriate government agency shall first be obtained. Where the Commission is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of this Code and existing laws, it shall issue a certificate of merger or of consolidation, as the case may be, at which time the merger or consolidation shall be effective ." (Emphasis supplied) However, when the parties to the merger provided for a date when their merger shall take affect, in which case, the effective date of merger shall be the date agreed upon by the constituent corporations which is stated in their Plan of Merger. As stated in Article I of the Plan of Merger which was approved by the SEC, BASF and CAPPI agreed as follows: "On June 30, 2002 (the Effective Date of Merger), CAPPI shall be deemed merged into and become part of BASF and the separate existence of CAPPI shall therefore cease by operation of law by virtue of and as provided in Section 80(2) of the Corporation Code. BASF shall be the surviving corporation in the merger" Clearly, the intention of BASF and CAPPI is to make their merger effective only on June 30, 2002. In a letter dated June 27, 2002, the SEC confirmed the date June 30, 2002 as the effective date of merger between BASF and CAPPI. The said letter states in effect that "considering that the Commission has already approved the Articles and Plan of Merger with June 30, 2002 as the effective merger date, we hereby confirm June 30, 2002 as the effectivity of merger in the instant case." In view of the foregoing and consistent with the opinion of the SEC, this Office is of the opinion that the effective date of merger for BIR purposes is also June 30, 2002. In such case, CAPPI will be considered automatically dissolved only on June 30, 2002 without need of further act of deed. Thus, for purposes of complying with the requirements of post-merger notice and filing of short-term period return under Section 52 (C) of the Tax Code of 1997, the thirty-day period shall be reckoned from June 30, 2002, the effective date of merger. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue