Whether Magellan Capital Holdings Corporation (MCHC) is Liable to Pay Documentary Stamp Tax on the Issuance of Certificates of Stock Evidencing the Re-Classified Issued Common Shares

December 6, 1995 BIR RULING NO. 184-95 175 000-00 184-95 Villaraza & Cruz 5/F LTA Building 118 Perea Street Legaspi Village City of Makati Attention: Attys . Sylvette Y . Tankiang-Ferrer and Cynthia D . Nuval-Ambrosio Gentlemen : This refers to your letter dated September 8, 1995, stating that your client, Magellan Capital Holdings Corporation (MCHC) has an authorized capital consisting of 4,650,000 common no-par value shares of stock and 675,000 redeemable preferred shares of stock with a par value of P100.00 per share; that out of the authorized capital stock, 3,744,396 Common Shares have been issued while the 675,000 Preferred Shares were issued and then redeemed on June 30, 1994; that the documentary stamp tax for the original issuance of certificates of stock for the Issued Common Shares has been paid to the Bureau of Internal Revenue and certificates of stock have accordingly been issued therefor; that the Corporation proposes to re-classify its Common Shares to Class A Common Shares and Class B Common Shares, whereby Class A Common Shares may be owned only by Filipino citizens, while Class B Common Shares may be owned by Filipino and non-Filipino citizens; that except for this re-classification, all rights and interests of the Common Shares, as well as the issued value thereof, will remain the same; and that the Corporation proposes to cancel all the stock certificates covering the Issued Common Shares and replace the same with stock certificates covering the Issued Common Shares but re-classified either as Class A or Class B as aforedescribed. Based on the foregoing, you are requesting confirmation of your opinion that MCHC is not liable to pay documentary stamp tax on the issuance of certificates of stock evidencing the re-classified Issued Common Shares. In reply, please be informed that your opinion is hereby confirmed. The issuance of the certificates of stock for the re-classified Issued Common Shares does not constitute and original issuance of shares of stock for purposes of the documentary stamp tax imposed pursuant to Section 175 of the Tax Code, as amended. The Issued Common Shares have already been issued but will only be the subject to re-classification, hence there will be no transfer of interests over the Issued Common Shares which may be subject to documentary stamp tax as contemplated under Section 176 of the Tax Code. It may be stated herein that a re-classification of shares of stock is similar to the issuance of replaced or consolidated certificates of stock. The issuance of a new stock certificate which will consolidate al three stock certificates to only one certificate reflecting the aggregate sum of the shares and the new corporate name is not subject to documentary stamp tax provided the new certificate is issued to the same stockholder and its par value is not higher than the three replaced certificates (BIR Ruling No. 093-93 dated 10 March 1993). These circumstances are present in the re-classification of the Common Shares of MCHC. Accordingly, your client is not liable to pay documentary stamp tax on the issuance of certificates of stock evidencing the re-classified Common Shares. This ruling is issued on the basis of the foregoing representations. However, if upon investigation the facts turned out to be different, than this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue