Assignment Agreement Among and between PDI, Asian Development Bank and MR Holdings Ltd., Setting Out the Terms and Conditions for the Assignment by the ADB of Certain Loan and Mortgages to MRHL Subject Only to One Documentary Stamp Tax Based on the Outstanding Balance of the Loan

December 29, 1997 BIR RULING NO. 139-97 198, sec. 8 of RR 9-94 000-00 139-97 Sycip Salazar Hernandez & Gatmaitan SycipLaw-All Asia Capital Center 105 Paseo de Roxas 1226 City of Makati Attention: Attys . Ernesto S . Taio and Marietta A . Tibayan Gentlemen : This refers to your letter dated March 24, 1997 requesting on behalf of your client, Placer Dome, Inc. (PDI), for confirmation of your opinion that the Assignment Agreement among and between PDI, Asian Development Bank (ADB) and MR Holdings Ltd. (MRHL), setting out the terms and conditions for the assignment by the ADB of certain loan and mortgages to MRHL is subject only to one documentary stamp tax (DST) based on the outstanding balance of the loan, pursuant to Section 198 of the Tax Code, as amended, and Section 8 of Revenue Regulations No. 9-94. cdta It is represented that on November 4, 1992, ADB, an international financial institution, and Marcopper Mining Corporation (MMC), a publicly-listed mining corporation organized and existing under Philippine laws, entered into the following Loan Agreements: "a) The Principal Loan Agreement, whereby ADB agreed to extend a loan to MMC in the amount of Fifteen Million US Dollars (US$15,000,000) out of ADB's ordinary capital resources; and "b) Complementary Loan Agreement, whereby ADB agreed to extend a loan to MMC in the amount of Twenty Five Million US Dollars (US$25,000,000) to be funded by ADB from participation in the Complementary Loan by the Bank of Nova Scotia (BNS)." That to secure its obligation, MMC executed the following mortgages, viz.: "1. Deed of Real Estate and Chattel Mortgage dated November 11, 1992, whereby MMC mortgaged in favor of ADB all or substantially all its assets located in Marinduque, as security for the repayment of up to the sum of Thirty Eight Million US Dollars (US$38,000,000) of the Loan Agreements. "2. Deed of Real Estate and Chattel Mortgage dated November 11, 1992, whereby MMC mortgaged in favor of ADB all or substantially all of its assets located in Makati City, as security for the repayment of up to the sum of Ten Million US Dollars (US$10,000,000) of the Loan Agreements. "3. Deed of Chattel Mortgage dated November 11, 1992, whereby MMC mortgaged in favor of ADB all or substantially all of its assets located in Pasay City, as security for the repayment of up to the sum of One Million US Dollars (US$1,000,000) of the Loan Agreements." that at present, MMC has an outstanding debt of US$18,453,450.02 owing to ADB under the Loan Agreements; that, meanwhile, under the Assignment Agreement, PDI, through its wholly-owned subsidiary, Placer Copper Holdings, Inc. (PCHI), which owns 39.9% of the outstanding capital of MMC, MRHL (an indirect wholly-owned subsidiary of PDI organized and existing under the laws of Cayman Islands), and ADB agree to ADB's assignment and transfer of all its rights, title, interests and obligations, including that owing to BNS, pursuant to and arising out of or in connection with the Loan Agreements and the Mortgages to MHRL, which remain outstanding as of the date of the Assignment Agreement; that the Assignment Agreement consolidates into one document the aforementioned Loan Agreements and the Mortgages effectively containing such terms and conditions first indicated therein; and that PDI has paid the corresponding documentary stamp tax computed on the basis of the foregoing premise. In reply thereto, please be informed that Section 198 of the Tax Code, as amended, thus states, viz.: "SEC. 198. Stamp tax on assignments and renewals of certain instruments . Upon each and every assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness by altering or otherwise, there shall be levied, collected and paid a documentary stamp tax, at the same rate as that imposed on the original instrument." The abovequoted Section clearly provides for the imposition of documentary stamp tax on the assignment of any mortgage or on the renewal or continuance of any agreement, contract or any evidence of obligation or indebtedness. In the instant case, DST shall be imposed on the assignment of the mortgage to MHRL, and not on the assignment of the loan since the latter is not for renewal or continuance. Anent to this, Section 8 of Revenue Regulations No. 9-94, likewise provides that "SEC. 8. Loan Agreements/Promissory Notes secured by a Pledge/Mortgage . Where only one instrument was prepared, made, signed and executed to cover a loan agreement/promissory note, pledge/mortgage, the documentary stamp tax prescribed in Section 195 of the Tax Code, as amended, shall be paid and computed on the full amount of the loan or credit granted. In this regard, the instrument shall be treated as covering only one taxable transaction , subject to the higher documentary stamp tax. (Emphasis supplied.) Thus, since the abovequoted Revenue Regulations will necessarily apply to the case where a loan agreement and mortgage are simultaneously executed and made subject of a single instrument, then logic dictates that the same should likewise apply to an assignment of these documents which are contained and subject of a single document, the Assignment Agreement in this case. Accordingly, since the imposition of DST on the amount of the mortgage payable, which is equivalent to the outstanding balance of the loan at the time of the assignment (or the amount of US$18,453,450.02 under Section 195 of the Tax Code, as amended), is in all probability higher than the DST imposed on loan agreement pursuant to Section 180 of the same Code, then the same shall be the DST that should be levied on the subject Assignment Agreement. aisadc 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 as represented are different, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue