Return of Capital or Principal is Not Subject to Income Tax

September 8, 1987 BIR RULING NO. 271-87 29 000-00 271-87 Gentlemen : This refers to your letter dated August 31, 1987 requesting a ruling as to the tax liability, if any of your client, Eveready Battery Company Philippines, Inc. if your client reduces its capital from its current subscribed and paid-up capital of P95.0 million to P45.0 million; and that the amount of P50.0 million, representing the reduced capital, will be repatriated to your client's sole stockholder, Ralston Purina Overseas Company, a wholly-owned American corporation as return of capital. In reply thereto, I have the honor to inform you that the amount of P50.0 million representing the reduced capital which will be repatriated to your client's sole stockholder, Ralston Purina Overseas company is not subject to income tax since the same constitutes a return of capital or principal and not income as the term is defined in Section 29 of the Tax Code as amended by Executive Order No. 37. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner