Claim for Tax Treaty Relief by Alcatel-Lucent International Holdings

August 23, 2012 DOF OPINION Quisumbing Torres 12th Floor, Net One Center 26th St. cor. 3rd Ave., Crescent Park West, Bonifacio Global City, Taguig Attention: Atty. Dennis G. Dimagiba Atty. Ver Angelo N. Sumabat Gentlemen : This resolves Alcatel-Lucent International Holdings, Inc.'s (Alcatel-Lucent's) Request for Reconsideration of the Decision dated April 10, 2012 affirming Bureau of Internal Revenue (BIR) Ruling No. ITAD 270-11 dated November 10, 2011. A thorough re-examination of the facts of this case in relation to the relevant BIR regulations reveals the following: One, "requests for rulings on issue/s or transactions based on hypothetical situations" and "requests for rulings that are not accompanied by complete documents or information as provided in Revenue Memorandum Circular (RMC) Nos. 39-2001 and 14-2001, Revenue Memorandum Order (RMO) Nos. 32-2001 and 1-2000, in relation to BIR Form 0901" have indeed been included by the BIR in the list of "No-Ruling Areas" provided under Revenue Bulletin No. 01-03. Said Revenue Bulletin, which remains subsisting to date, was issued for the purpose of declaring certain issues or subject matters as "No-Ruling Areas" areas over which the appropriate office of the Bureau is instructed not to accept any request for ruling. Two, RMO No. 1-2000 required the taxpayer claiming tax treaty relief to file not only BIR Form 0901 at least 15 days before the transaction but also all the supporting documents justifying the relief sought. aSCDcH Three, BIR Form No. 1928 (the form authorized by the BIR to be used for the processing of tax treaty relief applications involving gains from sale or transfer of shares of stocks in a Philippine corporation pursuant to RMO No. 30-02) expressly identifies the supporting documents to be submitted for transactions similar to the one at hand, which include: Documents pertaining to the acquisition/transfer of shares by the applicant; Duly notarized Certificate of the Corporate Secretary of the Philippine corporation whose shares of stock were sold showing the number and value of the shares of the seller and the latter's percentage ownership of the corporation as of the date of sale and the acquisition date of the shares of stock; Comparative schedule of property, plant and equipment of the Philippine corporation as of the transaction date; and Certified copy of the audited financial statements of the Philippine corporation as of the date of sale. If unavailable, the most recent financial statements adjusted up to the date of sale may be used. Notably, these documents could only be prepared after the transaction or the sale of shares has already taken place. After taking the foregoing into careful consideration, we are convinced that there does not appear to be any way that Alcatel-Lucent could have submitted its tax treaty relief application together with all the supporting documents at least 15 days before the date of execution of the Share Repurchase Agreement. For one, most of the documentary requirements would have still been unavailable at that time. For another, had Alcatel-Lucent proceeded to file the application prior to the prescribed period by attaching an unsigned Share Repurchase Agreement, such would have not been given due course by the BIR for being a "No-Ruling Area". EcICSA We are thus constrained to grant Alcatel-Lucent's Request for Reconsideration and hereby direct the Commissioner of the Internal Revenue to promptly determine whether or not Alcatel-Lucent is entitled to the relief sought pursuant to the relevant provisions of the Convention Between the Government of the United States of America and the Government of the Republic of the Philippines with Respect to Taxes on Income. Very truly yours, (SGD.) CESAR V. PURISIMA Secretary