Tax Exemption of the Sale of the Marcopper Shares by PCGG Pursuant to the Privatization Program of the Government

November 14, 1994 BIR RULING NO. 154-94 Proclamation 50 000-00 154-94 King Capuchino Tan & Associates 2nd Floor, Belman II Bldg. Quezon Ave. corner Cordillera St. Quezon City Attention: Atty . Lincoln L . Tan, Jr . Gentlemen : This refers to your letter dated October 10, 1994 stating that last September 19, 1994, the Presidential Commission on Good Government (PCGG) after approval by the Committee on Privatization (COP) sold to Provident Tree Farms, Inc. (PTFI), a private corporation organized and existing under Philippine Laws, 171,283,028 common shares of Marcopper Mining Corporation (Marcopper) which form part of the recovered assets of PCGG at a price of P1.51 per share; and that PCGG was authorized to dispose of the Marcopper shares by COP per its letter dated May 27, 1994 which in effect designated PCGG as COP's disposing entity in accordance with R.A. No. 7661. In connection therewith, you are requesting confirmation of your opinion to the effect that "1) the sale of the Marcopper shares to PTFI, or to other private person or entity, by PCGG pursuant to the privatization program of the government under Proclamation No. 50 and R.A. 7661, is exempt from stock transfer tax, documentary stamp tax and such other tax or fees; "2) that the tax exemption on the privatization program extends not only to APT but also to PCGG or any other government entity as may be designated by COP, the latter being the central agency of the privatization program of the government as per R.A. 7661; and cdtech "3) that the sale of the Marcopper shares can immediately be recorded in the Stock Transfer Book of Marcopper Mining Corporation by its Corporate Secretary in as much as the transaction is exempt from any tax." In reply thereto, please be informed that Section 35 of Proclamation No. 50 provides, viz: "Sec. 35. Exemption from Taxes, Fees and Other Charges . The provisions of any law to the contrary notwithstanding the Trust as well as the corporations and assets held by it, shall be exempt from all taxes, fees, charges, imports, and assessments arising from or occasioned by the passing of title over such corporations or assets from the government institutions to the Trust and/or from the Trust to a private acquisitor or buyer imposed by the National Government or any subdivision thereof including but not limited to stock transfer taxes, capital gains taxes, documentary stamps, registration fees and the like: Provided, that in case the said government institutions acquired the said assets by foreclosure, the non-payment of similar taxes, fees, charges, imports, and assessments shall not be a bar to the consolidation of title in the foreclosing institutions and the subsequent passing of title to the Trust of the corporations held by the Trust. "The sale or transfer of such corporations or assets shall not be enjoined or hindered by the existence of any liens by way of taxes, charges or other assessments in favor of the government at the time of sale or transfer: Provided, that the proceeds from such sale or transfer shall be subject to a tax lien and first be applied to satisfy such obligations secured by said liens." The aforequoted provision of Proclamation No. 50 was not amended by R.A. No. 7181 which extended the life of the COP and the APT from December 8, 1991 to August 31, 1992. Again, R.A. No. 7661 which amended R.A. No. 7181 extended anew the life of the COP and the APT up to June 30, 1995 and provides that the COP shall serve as the central agency of the privatization program and, accordingly, is further empowered to designate the disposition entity for all assets intended for privatization, including all assets and properties recovered by the PCGG and government idle properties. Accordingly, your following opinions to the effect that "1) the sale of the Marcopper shares to PTFI, or to any other private person or entity, by PCGG pursuant to the privatization program of the government under Proclamation No. 50 and R.A. 7661, is exempt from stock transfer tax, documentary stamp tax and such other tax or fees; "2) that the tax exemption on the privatization program extends not only to APT but also to PCGG or any other government entity as may be designated by COP, the latter being the central agency of the privatization program of the government as per R.A. 7661; and "3) that sale of the Marcopper shares can immediately be recorded in the Stock Transfer Book of Marcopper Mining Corporation by its Corporate Secretary in as much as the transaction is exempt from any tax." cdta are hereby confirmed. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue