BIR Ruling [UN-072-95]

February 21, 1995 BIR RULING [UN-072-95] Bautista Picazo Buyco Tan & Fider 8th Floor, Singapore Airlines Bldg. 138 H. V. dela Costa St., Salcedo Village Makati, Metro Manila Attention: Atty . Silverio Benny S . Tan Gentlemen : This refers to your letter dated January 27, 1995 stating that your clients, Mr. Enrique Razon, Sureste Realty Corporation, Razon Industries, Inc. and Mr. Enrique K. Razon, Jr. are stockholders of Internal Container Terminal Services, Inc. (ICTSI) a publicly listed Philippine corporation engaged in international port management business; that they constitute the Razon Group in ICTSI; that under the Contract for the Management, Operation and Development of the Manila International Container Terminal between ICTSI and the Philippine Ports Authority, the Razon Group together with the Anscor Consolidated Corporation Group is required to maintain controlling interest in ICTSI; that the parties have agreed to create a voting trust in accordance with Section 59 of the Corporation Code to ensure that the shareholdings of the Razon Group in ICTSI will be intact and will vote as one and act as one in the corporate affairs of ICTSI to maintain their current active participation in the management and control of ICTSI; that Mr. Enrique K. Razon, Jr. as a director and Executive Vice President of ICTSI is actively involved in the management and operation of ICTSI, and has been designated as the trustee of the voting trust; that a voting trust separates legal title of the shares from their beneficial ownership; that legal title and voting rights are transferred to the trustee while the transferor retains beneficial or equitable ownership of the shares and is entitled to its fruits, e.g. dividends; that upon expiration of the voting trust agreement (the law only allows a maximum of 5 years at any one time for the voting trust agreement, subject however to renewal) all rights granted in the voting trust agreement automatically expires and legal title to the shares are vested back to the transferor. In connection therewith, you are requesting for a ruling to the effect that the transfer of the shares to the trustee under the Voting Trust Agreement is not subject to capital gains tax and to the documentary stamp tax since there is no transfer of beneficial ownership over the shares as a result thereof. In reply thereto, please be informed that since there is no actual transfer of ownership over the aforementioned shares of stock as a result of the transfer of said shares to the trustee, Mr. Enrique K. Razon, Jr. under a Voting Trust Agreement, the said transfer is not subject to the capital gains tax under Sections 21 (d) and 24 (e) (2) as amended by Section 124-A all of the Tax Code, as amended. Moreover, the Voting Trust Agreement is not subject to the documentary stamp tax under Section 176 of the Tax Code, as amended, but the notarial acknowledgment is subject to the documentary stamp tax of P10.00 under Section 188 of the same Code. The aforementioned shares of stock may now be registered with the Securities & Exchange Commission in the name of the designated trustee, Mr. Enrique K. Razon, Jr. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. (BIR Ruling No. 123-93 dated April 5, 1993). cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)