Exemption of Issuance of the Shares of Stocks from the DST

August 11, 1989 BIR RULING NO. 173-89 173 000-00 173-89 Gentlemen : This refers to your letter dated May 2, 1989 requesting in behalf of your client, The Philippine Banking Corporation (TPBC) a ruling exempting from the documentary stamp tax its issuance of the shares of stocks based on the following facts: aisadc Documentary evidence submitted shows that TPBC is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that in the Amendment to the Memorandum of Agreement dated 6 October 1988 entered into by TPBC, on one hand, and numerous investors therein, on the other, it was agreed, among other things, that of the increase in capital stock of said Bank with a par value of P50.00 per share John Gaisano would subscribe to 1,000,000 shares with P50,000,000.00 paid-up; Jorge Go to subscribe to 1,000,000 shares with P50,000,000.00 paid-up; and Cathay Pacific Steel Smelting Corp. to subscribe to 1,300,000 shares with P65,000,000.00 paid-up. The aforesaid three investors were purportedly acting not only for themselves but also as trustees for certain persons. They paid the documentary stamp tax relating to their own subscription and those of the trustor-assignees pursuant to Section 175 of the Tax Code, as amended, as follows: TRUSTOR DOCUMENTARY STAMP TAX PAID John S. Gaisano P425,000.00 Jorge S. Go 425,000.00 Cathay Pacific Steel Smelting Corporation 552,550.00 On October 12, 1988, they executed respective Deeds of Assignment whereby they assigned, transferred and ceded unto their respective trustors, the corresponding rights, title and interest in the portion of the subscriptions under the Amendment to the Memorandum of Agreement aforestated, to wit: (a) John Gaisano assigned portions of his subscription to: ASSIGNEES NO. OF SHARES AMOUNT PAID-UP JS GAISANO, INC. 420,000 P21,000,000.00 White Gold, Inc. 160,000 8,000,000.00 S & A Gaisano Cagayan, Inc. 160,000 8,000,000.00 Shogun Management & Development Corp. 80,000 4,000,000.00 Benito S. Gaisano 40,000 2,000,000.00 Edmund S. Gaisano 40,000 2,000,000.00 (b) Jorge Go assigned portions of his subscription to: ASSIGNEES NO. OF SHARES AMOUNT PAID-UP Isetann Department Store, Inc. 400,000 P20,000,000.00 Elena Go 100,000 5,000,000.00 Vicente Co, Jr. 100,000 5,000,000.00 Mariano Go Biao 30,000 1,500,000.00 Ricky Go 25,000 1,250,000.00 Joy Margaret Go 25,000 1,250,000.00 Ong Siok Keng 20,000 1,000,000.00 JSG Property & Management Corp. 200,000 10,000,000.00 (c) Cathay Pacific Steel Smelting Corp. assigned portions of its subscription to: ASSIGNEES NO. OF SHARES AMOUNT PAID-UP Cathay Metal Corp. 600,000 P30,000,000.00 Renato Guevarra 100,000 5,000,000.00 On October 12 and 14, 1988, in compliance with the provisions of the Memorandum of Agreement and its Amendment, the subscribers (including their assignees) paid their respective subscriptions to increase the capital stock of TPBC. In reply, please be informed that the foregoing transaction does not qualify as a sale or transfer of such securities as referred to under Section 176 of the Tax Code, as amended, since these securities have not been issued by TPBC and the Deed of Assignment effects only the transfer of the right to subscribe to the increase in the shares of stock of TPBC. It is noted that the aforementioned section imposes documentary stamp tax on the assignment of the shares of stock and not on the assignment of the right to subscribe to the shares of stock. Hence, the physical issuance of shares of stock to the above-mentioned trustors should not be subject again to the payment of the documentary stamp tax due on the subsequent sale or transfer of the issued shares of stock. Accordingly, this Office believes and so holds that the assignment of the right to subscribe to the TPBC shares is exempt from the payment of the documentary stamp tax since these are, in fact, original issuances and the corresponding documentary stamp taxes on which have been paid on behalf of the assignees by their trustees. cdta Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner