Tax Consequence of the Transfer of Shares of Stock as a Result of a Merger

December 23, 1988 BIR RULING NO. 595-88 25 (b) (5) (C) (i) 466-88 595-88 Gentlemen : This refers to your letter dated September 4, 1988 in behalf of your client, Bristol Laboratories (Philippines), Inc. (BL) requesting confirmation of your opinion to the effect that the transfer by Bristol Laboratories, International, S.A. (BLISA) of its 259,993 BL shares of stock to BLISA, TWO, Inc. (BLT) as a result of their merger with BLT as the surviving corporation is not subject to any Philippine tax; and that the Agreement of Merger between BLISA and BLT which was executed and accepted outside the Philippines is not subject to documentary stamp tax. It is represented that BL is a corporation organized under the laws of the Philippines, whose entire outstanding shares of stock consisting of 610,000 shares were owned by the following: Bristol-Myers Co. (BMC), a State of Delaware corporation 350,000 shares, BLISA, a Panamian Sociedad Anonima 259,993 shares and 7 Qualifying shares or a total of 610,000 shares; that BLISA is a Sociedad Anonima organized under the laws of Panama and a wholly-owned subsidiary of BLISA, Inc.; that BLISA, Inc. is a corporation organized under the State of Delaware and wholly-owned subsidiary of BMC; that BMC is a corporation organized under the laws of the State of Delaware which aside from owning 100% of BLISA, Inc. also owns 57.3777% of BL shares of stock; that on June 9, 1988 pursuant to a corporate reorganization, BLISA and BLT merged with BLT as the surviving corporation; that all the assets and liabilities of BLISA were transferred to BLT, including the 259,993 shares of stock of BL; that the name of BLT was changed to Bristol Laboratories International, S.A. (Bristol); and that BMC, BLISA, Inc., BLISA and BLT are not engaged in trade or business in the Philippines. In reply thereto, please be informed that on the basis of the facts as herein represented, no sale, exchange or disposition of stock took place between BLISA and BLT because there is no effective transfer of beneficial ownership. In a merger, the absorbing corporation (BLT) succeeds to the rights and liabilities of the absorbed corporation (BLISA) and merely carries on the identity of the latter (BLISA) (Cashman V. Brownlee, 27 N.E. 560). Consequently, no gain was realized by BLISA. aisadc Moreover, the Agreement of Merger executed outside the Philippines between BLISA and BLT is not subject to documentary stamp tax. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner