BIR Ruling [UN-195-94]

July 1, 1994 BIR RULING [UN-195-94] Carlos J. Valdes & Co. CJVC Building 108 Aguirre Street Legaspi Village Makati, Metro Manila Attention: Mr . Romeo C . Alba Partner Gentlemen : This refers to your letter dated May 6, 1994 stating that your client, Coded Communication Corporation (CODED), organized and existing under the laws of Delaware, USA, is now in the process of negotiating for the payment of a loan of Domestic Satellite, Inc. (DOMSAT) with Asset Privatization Trust (APT); that as part of the restructuring arrangement, CODED will pay at a discount and assume the loan of DOMSAT with APT; and that the loan assumed will be converted into equity with the issuance of the corresponding shares (representing the actual) payment to APT) and the balance will be converted into paid-in surplus without the corresponding issuance of additional shares. In connection therewith, you now request for a ruling that the conversion of the loan into equity and paid-in surplus of DOMSAT without corresponding issuance of additional shares is not subject to income and donor's taxes on the part of CODED and DOMSAT. In reply thereto, please be informed that since the conversion of the loan into equity and paid-in surplus represents additional capital contribution, said conversion is not subject to income and donor's taxes. (BIR Ruling No. 300-88 dated July 6, 1988). cdtech Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner Legal Service