Tax Consequences of the Proposed Transfer of Shares of Stock Issued by ABBI Corporation in the Name of ABB Zurich

September 16, 1991 BIR RULING NO. 189-91 24 347-87 189-91 Gentlemen : This refers to your letters dated February 2 and April 4, 1990 requesting a ruling as to the tax consequence of the proposed transfer of shares of stock issued by ASEA Brown Boveri, Inc. (ABBI), a corporation organized under the laws of the Philippines in the name of ABB ASEA Brown Boveri, Ltd. (ABB Zurich). It is represented that ABBI is engaged in the business of importation, manufacture, sale at wholesale and repair of electrical power generation and distribution equipment as well as mining prime-over, industrial and related equipment, that except for 5 qualifying shares which are registered in the names of the individual directors, 148,994 common shares of ABBI with a par value of P100.00 per share, representing 85% of all the outstanding shares, are registered in the name of ASEA Pacific Holdings (Pte) Ltd. (APH) while 15% or 26,290 common shares are registered in the name of BBC Brown Boveri and Company Limited, until lately a corporation organized under the laws of Switzerland; that BBC Brown Boveri and Company Ltd. and ASEA AB of Sweden entered into a merger agreement which resulted in the formation and in a corporation of ABB Zurich under the laws of Switzerland; that as a result of the merger, the 15% holding or 26,290 common shares of the then BBC Brown Boveri & Company Limited in ABBI were automatically transferred to ABB Zurich; that as an integral part of an on-going corporate reorganization among its subsidiaries, ABB Zurich adopted a policy decision to the effect that all the shareholdings of the ABB group of companies will be directly registered in its name; that among the shares to be transferred to ABB Zurich in pursuance of this policy are the above-mentioned 148,994 common shares of APH in ABBI; that APH a wholly-owned subsidiary of ABB Zurich is organized under the laws of Singapore; and that as a result of the reorganization abroad, all the outstanding shares of ABBI (i.e., the 85% in the name of APH and the 15% in the name of BBC Brown Boveri and Company Ltd.) will have been transferred to and registered in the name of ABB Zurich. In reply thereto, I have the honor to inform you that in the transfer to ABB Zurich of the 15% stockholdings of BBC Brown Boveri & Co., Ltd. which consolidated with ASEA AB of Sweden to become the ABB Zurich, no gain or loss shall be recognized pursuant to Section 34 (c) (2) of the Tax Code, as amended. Moreover, gains from the transfer to ABB Zurich of the 85% stockholdings of APH in ABBI shall not be subject to tax in the Philippines. Said gain shall be subject to tax in Singapore pursuant to Article 13(4) of the RP-Singapore Tax Treaty. Furthermore, there is no gift tax consequence on the transfer of shares by a wholly-owned subsidiary, APH to ABB Zurich its parent company since the transfer is part of an ongoing corporate reorganization among the subsidiaries of ABB Zurich so that all the shareholdings of the ABB group of companies will be directly registered in its name. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation the same could not be substantiated, then this ruling shall be considered null and void. cdti Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner (Officer-in-Charge)