BIR Ruling No. 406-61

No date supplied BIR RULING NO. 406-61 This is in connection with your request for opinion as to whether or not the transaction described below could be considered free from income tax under the provisions of Section 35(c) of the National Internal Revenue Code. cdta "A resident foreign corporation exchanges substantially all its branch assets in the Philippines solely for (shares of stock of a wholly-owned domestic corporation. The resident foreign corporation has other assets abroad." In reply, I have the honor to inform you that under Section 35(c) of the National Internal Revenue Code, all exchanges of property are taxable, except in cases of merger and consolidation. Inasmuch as the above transaction is neither a merger nor a consolidation, the transfer of all the branch assets in the Philippines for shares of stock of a wholly-owned domestic corporation may give rise to a taxable gain or loss. If the transfer of the assets is made at book value, no taxable gain will be realized. However, if the transfer is made at the fair market value which is higher than the book value, the difference will be subject to tax. cdti