Asset Transfer Agreement Not Subject to Documentary Stamp Tax

June 16, 1999 BIR RULING NO. 075-99 Secs. 175 and 176-000-00-075-99 Alba Romeo & Co. 7/F Don Chua Lamko Building H.V. Dela Costa Street Salcedo Village, Makati City Gentlemen : This refers to your letter dated December 7, 1998 requesting for a reconsideration of BIR Ruling No. S-40-243-98 dated November 25, 1998 issued in favor of Alba Ledesma & Co.,7th Floor, Don Chua Lamko Building, H.V. Dela Costa St. cor. Alfaro St.,Salcedo Village, Makati City wherein this Office held in part as follows: "xxx xxx xxx "Moreover, the shares of stock to be issued by EG & G Vactec Philippines Ltd. which in all probability are original issues are subject to the documentary stamp tax imposed by Section 175 of the Tax Code of 1997, which shall attach upon acceptance by the corporation of the stockholder's subscription regardless of the actual delivery of the certificates of stock. "Finally, pursuant to Section 176 of the Tax Code of 1977, the transfer of shares of stock in a domestic corporation shall be subject to a documentary stamp tax of One Peso and Fifty Centavos (P1.50) on each Two Hundred Pesos (P200.00), or fractional part thereof, of the par value of such certificate of stock. Thus, the transfer by EG & G International Ltd shares in exchange for shares of stock of EG & G Vactec Philippines, Ltd . shall be subject to the documentary stamp tax imposed under the aforementioned section of the Tax Code of 1997 (BIR Ruling No. S-40-087-98 dated June 11, 1998)" (Underscoring supplied) You are of the opinion that since both EG & G International Ltd. (transferor) and EG & G Vactec Philippines Ltd. (transferee) are both non-resident foreign corporation being organized and existing under the laws of Cayman Island, the original issuance by the transferee of its shares of stock to the transferor in exchange for its Philippine branch assets and liabilities is not subject to the documentary stamp tax imposed under Section 175 of the Tax Code of 1997. Moreover, considering that the "Asset Transfer Agreement" executed by the transferor in favor of the transferee does not include shares of stock of the transferor, the "Asset Transfer Agreement" is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code of 1997. In reply thereto, please be informed that after a careful restudy of the aforementioned ruling, this Office is of the opinion as it hereby holds that since EG & G International Ltd. (transferor) and EG & G Vactec Philippines Ltd. (transferee) are both non-resident foreign corporations which are outside the jurisdiction of the Philippines, the original issuance of shares of stock by the transferee in favor of the transferor in exchange for its Philippine branch assets and liabilities is not subject to the documentary stamp tax imposed under Section 175 of the Tax Code of 1997. Moreover, since the "Asset Transfer Agreement" executed by the transferor in favor of the transferee does not include shares of stock, the "Asset Transfer Agreement" is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code of 1997. In view of the foregoing, the aforementioned BIR Ruling No. S-40-243-98 dated November 25, 1998 is hereby modified such that the original issuance of shares of stock by EG & G Vactec Philippines Ltd. to EG & G International Ltd. in exchange for its Philippine branch assets and liabilities is not subject to the documentary stamp tax imposed under Section 175 and that the "Asset Transfer Agreement" is not likewise subject to the documentary stamp tax under Section 176 of the Tax Code of 1997. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue