Mortgage Trust Indenture Exempt from Doc. Stamp Tax

December 27, 1993 BIR RULING NO. 520-93 MORTGAGE TRUST INDENTURE EXEMPT FROM DOC. STAMP TAX 173 195 235-91 389-93 520-93 Quisumbing, Torres, Evangelista 11th Floor, Pacific Star Building Makati Avenue, cor. Gen. Gil Puyat Ave. Makati 1200, Metro Manila Attention: Attys . Jose R . Sandejas and Lucas M . Nunag This refers to your letter dated December 16, 1993, requesting for confirmation of your opinion that the Mortgage Trust Indenture (the "Mortgage") dated as of December 15, 1993 executed by Subic Power Corporation ("SPC") in favor of Citibank, N.A. is exempt from the payment of documentary stamp tax ("DST") under Section 195 of the National Internal Revenue Code, as amended. It is represented that SPC is a corporation organized and existing under the laws of the Philippines, with office address at Subic Bay Free Port (SBF) Zone and that it is a duly registered SBF Enterprise with Certificate of Registration No. 93-0007; that SPC as Mortgagee, and Citibank. N.A. as Trustee, executed the "Mortgage" dated December 15, 1993 in the State of Texas, U.S.A., by virtue of which the existing power plant facility (present assets) and future assets of SPC located within the SBF shall stand as security for the Notes issued by SPC to finance the construction and development of a 108 megawatt power station in the SBF. In reply, please be informed that under Section 12(c) of Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, in relation to Executive Order No. 97-A, business enterprises registered with the Subic Bay Metropolitan Authority (SBMA) and operating within the Secured Area of the Zone shall, in lieu of local and national taxes, be liable to the payment of the preferential tax at the following rates, based on the gross income earned: 1) To the National Government 3% 2) To the Local Government units affected by the depletion of the Zone 1% 3) To the Special Development Fund to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic and other municipalities continuous to the base area 1% Exemption from other internal revenue taxes, like documentary stamp tax, shall be for transactions undertaken and/or conducted in connection with the business operation of the registered enterprise operating within the Subic Bay Free Port Zone. Accordingly, since the documentary stamp tax prescribed under Section 195 of the Tax Code, as amended, is an excise tax imposed on the privilege of entering into transactions, the same finds no application for transactions conducted or entered into by a registered enterprise within the free port zone. Such being the case, since the Mortgage Trust Indenture/Security Agreement executed by and between the SPC and Citibank, N.A. relates to real and personal properties located within the SBF, it is a tax-exempt transaction pursuant to Section 12(c) of R.A. 7227. prll LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue