BIR Ruling No. 051-12

February 9, 2012 BIR RULING NO. 051-12 32 (B) (7) (a) NIRC; BIR Ruling No. DA-130-02 Romulo Mabanta Buenaventura Sayoc & De Los Angeles Attorneys at Law 30th Flr. Citibank Tower 8741 Paseo de Roxas, Makati Attention: Jose Salvador Y. Mirasol Juan Ricardo B. Tan Jayson L. Fernandez Tax Partners Gentlemen : This refers to your letter dated August 11, 2010 requesting on behalf of your client, IFC Capitalization (Equity) Fund, LP (ICEF), for confirmation of your opinion that ICEF, being a limited partnership 100% beneficially-owned by the International Finance Corporation (IFC) and the Japan Bank for International Cooperation (JBIC), is exempt from income tax, and consequently from any withholding tax on its income from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines pursuant to Section 32 (B) (7) (a) of the Tax Code. Background 1. ICEF is a nonresident foreign limited partnership organized and existing under the laws of the State of Delaware, United States of America. Its registered office is located at 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, USA. 2. ICEF is not registered as a corporation or partnership in the Philippines. 3. ICEF was originally formed on January 23, 2009 as the IFC Recapitalization (Equity) Fund, LP, with IFC Recapitalization (Equity) Fund (GP), LLC as the general partner, for the primary purpose of making investments in private sector banks that have systemic impact on their home markets. 4. On June 2, 2009, ICEF changed its name to the IFC Capitalization (Equity) Fund, LP and the general partner changed its name to IFC Capitalization (Equity) Fund (GP), LLC. 5. As of July 16, 2010, ICEF has total commitments of US$1.275 Billion with ownership interests as follows: a. General Partner IFC Capitalization (Equity) Fund (GP), LLC b. Limited Partners IFC and JBIC 6. IFC Capitalization (Equity) Fund (GP), LLC is a Delaware limited liability company wholly-owned by IFC Asset Management Company, LLC, itself a wholly-owned subsidiary of the IFC, an international financial institution organized by its member governments. The Philippines is a member of the IFC and is a party to its Articles of Agreement, which have been duly ratified under Republic Act No. 1604. The IFC's investments in the Philippines include infrastructure, power, water, agri-business, transportation and mining projects. 7. JBIC is a financing institution owned and controlled by the Government of Japan. JBIC provides policy-based finance with a mission to contribute to the sound development of the Japanese and international economy. TcSICH 8. ICEF recently invested in 136,315,662 common shares issued by Banco de Oro Unibank, Inc. (BDO), a domestic universal banking institution, and is considering making other investments in equity and debt instruments in the Philippines. In reply, please be informed that income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from foreign governments, and (iii) international or regional financial institutions established by foreign governments are exempt from income tax. (BIR Ruling No. DA-130-02 dated July 31, 2002) Section 32 (B) (7) (a) of the Tax Code provides, to wit: "SEC. 32. Gross Income. xxx xxx xxx "(B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx "(7) Miscellaneous Items. "(a) Income Derived by Foreign Government. Income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from foreign governments, and (iii) international or regional financial institutions established by foreign governments." Considering that ICEF is a limited partnership among IFC and JBIC (directly or through wholly-owned subsidiaries), its investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on its deposits in banks in the Philippines, including its dividend income on the BDO common shares, are not subject to Philippine income tax and consequently to any withholding tax. 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue