Effectivity of R.A. No. 7717 Which Was Approved on May 5, 1994 and Published in Malaya and Philippine Times Journal on May 12, 1994

March 7, 1995 BIR RULING NO. 050-95 124-A 000-00 050-95 Megaworld Properties & Holdings, Inc. 16/F SolidBank Building Paseo de Roxas, Makati Metro Manila Attention: Mr . Cirilo L . Manlangit VP - Corporate Management Gentlemen : This refers to your undated letter requesting for a clarification of the following issues: 1. Effectivity of R.A. No. 7717 which was approved on May 5, 1994 and published in Malaya and Philippine Times Journal on May 12, 1994; prll 2. Whether or not initial public offering of shares of stock approved between May 6 and 26, 1994 by the Securities and Exchange Commission (SEC) and the Philippine Securities Exchange are subject to the stock transactions tax prescribed under R.A. No. 7717; and 3. Whether the stock transactions tax paid by your broker pursuant to Section 2 of R.A. No. 7717 is a final tax. In reply please informed as follows: 1. R.A. No. 7717 took effect on May 28, 1994, or after fifteen (15) days from its publication in the May 12, 1994 issues of the Malaya and Philippine Journal , as mandated under Section 5 thereof, stating: "SEC. 5. This Act shall take effect fifteen (15) days after its publication in the official Gazette or in at least two (2) national newspapers of general circulation whichever comes earlier." 2. Applying the settled principle of non-retroactivity of tax statutes as mandated under Article 4 of the Civil Code, transactions involving sale, barter, exchange, or other dispositions of shares of stock through initial public offering, prior to May 28, 1994 shall not be subject to the stock transactions tax under R.A. No. 7717. Accordingly, shares of stock sold, bartered, exchanged or otherwise disposed of through initial public offering approved between May 6 and May 26, 1994 by the Securities and Exchange Commission (SEC) and the Philippine Securities Exchange are not subject to the stock transfer tax imposed in accordance with Section 124-A of the Tax Code, as amended by R.A. No. 7717. Moreover, shares of stock subscribed and paid-up as of the time of registration of the corporation with the SEC shall be considered sold as of the date of registration. Hence, the provisions of R.A. No. 7717 do not apply to your company's initial public offering. 3. The stock transactions tax under R.A. No. 7717 is a percentage tax imposed principally on closely-held corporations, who sell, barter, exchange, or dispose of shares of stock in an initial public offering or on the seller of such shares of stock in a secondary offering. But unlike other percentage taxes, it is the broker handling the sale of shares of stock who is designated by law to collect the tax due from the seller, prepare a return therefor, and remit the amount collected to the Bureau of Internal Revenue. Since the broker has the sole responsibility for its computation and collection, it is already a final tax of the closely held corporation selling/issuing the same as to the person selling the same in a secondary offering. LLpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue