Tax Liability Arising from Transfer of Assets from Books of Parent Company to the Subsidiary Company's Books

August 17, 1999 BIR RULING NO. 126-99 27-000-00-126-99 SPI Technologies, Inc. SPI Bldg., Pascor Drive Sto. Nio, Paraaque, Metro Manila Attention: Ms . Maria Mina M . Rapadas Comptroller Gentlemen : This refers to your letter dated June 8, 1998 requesting clarification on the rules and/or any tax liability due you as a result of the transfer of assets from the books of the parent company to the subsidiary company's books. LexLib It is represented that SPI Technologies Inc. (SPI) is an established and internationally renowned leader in providing value added data conversion services from the Philippines to clients around the world; that in mid 1997, SPI acquired a company in Netherlands and part of the acquisition cost were computers amounting to US$2.7 Million on which no input tax was claimed; that the assets were retained in Netherlands and continued to be used for the subsidiary company's operations; and that you are now studying the possibility of transferring the recording of the assets from the books of the parent company (SPI) to the subsidiary company's books. In reply, please be informed that it is a general rule that the State can levy a tax only upon persons, property, income or acts of business that are within its territorial limits and bans it from collecting a tax on subject or objects outside those limits (Manila Gas Corporation vs. Col. of Int. Rev., 62 Phil 895). In as much as no physical transfer of assets to the Philippines were made during the acquisition of the Netherlands corporation by SPI but only a recording in the books of SPI was made to reflect such acquisition, the subsequent transfer of such assets in the books of its subsidiary does not involve any Philippine tax liability or consequence. 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.) BEETHOVEN L. RUALO Commissioner of Internal Revenue