ITAD BIR Ruling No. 153-15

April 30, 2015 ITAD BIR RULING NO. 153-15 International Finance Corporation 11 Floor, Tower One Ayala Triangle, Ayala Avenue 1226 Makati City Attention: Mr. Jesse O. Ang Resident Representative, Philippines Gentlemen : This refers to your letter dated November 5, 2014 requesting confirmation that the transactions to be undertaken by International Finance Corporation (IFC) and IFC Capitalization (Equity) Fund, LP [ICEF] are exempt from stock transaction tax. It is represented that IFC is an international organization established by the IFC Agreement among its member countries to further economic growth; that the Republic of the Philippines is a signatory to the IFC Agreement by virtue of R.A. No. 1604 (1956) which authorized the membership of the Philippines in IFC and its accession to the IFC Agreement ; and that IFC is not a dealer in securities. It is also represented that ICEF is a nonresident foreign limited partnership organized and existing under the laws of the United States of America (USA). ICEF is not a registered corporation or partnership in the Philippines and is not a dealer in securities. ICEF a limited partnership that is 100 percent beneficially-owned by IFC and the Japan Bank for International Cooperation (JBIC). ICEF and its transactions are effectively controlled and managed by IFC because its general partner is wholly-owned, indirectly, by IFC. Thus, the operations and transactions of ICEF are effectively the operations and transactions of IFC. It is further represented that IFC Capitalization (Equity) Fund (GP), LLC [IFC Fund] , is a limited liability company organized and existing under the laws of the USA. IFC Fund is the general partner of ICEF. IFC Fund is wholly-owned by IFC Asset Management Company, LLC (IFC Asset) which is also a limited liability company organized and existing under the laws of USA. In turn, IFC Asset is a wholly-owned subsidiary of IFC. It is finally represented that IFC is the legal and beneficial owner of 73,448,275 shares in RCBC. All of those shares are listed on the PSE. On or before March 31, 2015, IFC will sell and trade some of said shares through the PSE. The sale and trading of IFC's RCBC listed shares will be handled by and coursed through Credit Suisse Securities Philippines, Inc. (CSSP) . You now seek confirmation on whether the sale and trading by IFC and ICEF of their listed shares in RCBC, through PSE, which sale and trading will be handled by and coursed through CSSP, is exempt from the said stock transaction tax and as such, the said stock brokers are not required to withhold any stock transaction tax on such sale and trading. In reply, please be informed that Section 127 (a) of the Tax Code of the Philippines provides: SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded Through the Local Stock Exchange or Through Initial Public Offering . (A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded Through the Local Stock Exchange. There shall be levied, assessed and collected on every sale, barter, exchange, or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities, a tax at the rate of one-half of one percent (1/2 of 1%) of the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid by the seller or transferor. However, under Section 9, Article VI of the Articles of Agreement of IFC, it provides that the IFC, its assets, property, income and its operations and transactions authorized by the Agreement shall be immune from all taxation and from all customs duties, and that the IFC shall be immune from the liability to collect or pay any tax or duty, thus: "Article VI Status, Immunities and Privileges xxx xxx xxx Section 9. Immunities from Taxation . (a) The Corporation, its assets, property, income and its operations and transactions authorized by this Agreement, shall be immune from all taxation and from all customs duties. The Corporation shall also be immune from liability for the collection or payment of any tax or duty." Accordingly, pursuant to Section 9 (a) of the Articles of Agreement , income derived by IFC from the sale of its shares in RCBC is exempt from income tax imposed under Section 127 (a) of the Tax Code of the Philippines . Moreover, since the subject shares in RCBC constitute an asset or property of IFC, the sale or transfer of these shares shall be exempt from documentary stamp tax imposed under Section 175 of the Tax Code. However, under Section 173 of the Tax Code, since IFC is exempt, the buyer or transferee shall be liable to the payment of the documentary stamp tax on the transaction, thus: "SEC. 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers . Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax." This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue