BIR Ruling No. 675-2017

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

....1. Quezon City

COCOFED, et al. vs. Republic. GR Nos.

Republic,GR No. 18070S BIR Ruling No. 058-2013 BIR Ruling No. 247-2012 177857-58 & 178193; Cojuangco, Jr.vs

#675-2017

United Coconut Planters Bank 12/29/2017

UCPB Corporate Offices 7907 Makati Avenue, Makati City

Attention: Chief Finance Officer Cynthia A. Almirez

Gentlemen:

the tax implication of the cancellation o This refers to your letter dated November 7, 2017 requesting legai opinion on shares of First United Bank. later renamed as United Coconut Planters Bank ("UCPB"), issued in the names of various farmers and Mr. Eduardo Cojuangco, Jr., and the issuance of new shares of equivalent number in the name of the Republic of the Philippines, in order to give effect to and implement the Sunreme Court's Decisions in G.R. Nos. d and G.R. No.

It is represented that UCPB is a domestic banking corporation duly authorized to operate as expanded commercial bank. As of September 30, 2017, the list of stockholders of UCPB included, among others, various coconut farmers, Philippine Coconut Authority (PCA) and Mr. Eduardo Cojuangco, Jr.

It is further represented that on October 23, 2015, the Sandiganbayan issued a Resolution in Civil Case No. , entitled Republic of the Philippines vs. Eduardo Cojuangco, et al, the dispositive portion of which reads:

"WHEREFORE, in view of the foregoing. the Motion for Execution filed by Plaintiff Republic of the Philippines is hereby GRANTED.

Accordingly, let a Writ of Execution issue implementing the Supreme Court Decisions in G.R Nos. 177857-58 and 178193 and G.R No 180705. The PCA and defendant Cojuangco, Jr. are hereby ordered to surrender to the Court the necessary documents to effect the transfer of the subject shares of stock in favor of plaintiff Republic of the Philippines. The UCPB is directed to cancel the subiect shares of stock and to issue the eguivalent number of shares in the name of the Republic of the Philippines. " (Underscoring supplied)

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Cojuangco, Jr., and the issuance of new shares of equivalent number in the name of the Repuhlic of the Philinnines, pursuant to the Supreme Court's Decisions in G.R. Nos. donor's tax and documentary stamp tax (DST). Based on the foregoing, you now request confirmation that the cancellation of and I JCPB shares issued in the names of various farmers and Mr. Eduardo and G.R. No. is not subject to capital gains tax (CGT).

We rule as follows:

Capital Gains Tax

Section 24(C) of the 1997 Tax Code, as amended, provides for the taxability of

of stock not traded in the stock exchange, to wit: gains derived by a resident citizen from the sale, exchange or other disposition of shares

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final tax at the rates prescribed below is hereby imposed upon the net Stock Exchange. -- The provisions of Section 39(B) notwithstanding, a or other disposition of shares of stock in a domestic corporation, capital gains realized during the taxable year from the sale, exchange except shares sold or disposed of through the stock exchange: "(C) Capital Gains from Sale of Shares of Stock Not Traded in the

Not over P100.000 On any amount in excess of P100,000 10%" 5%

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the subject shares of stock and to issue the equivalent number of shares in the name of the Republic of the Philippines. Accordingly, the transfer of the subject UCPB shares in favor of the Republic of the Philippines, without any monetary consideration, and gains tax. (BIR Ruling No. 058-2013 dated February I. 2013 and BIR Ruling No. 247- involve saie, barter or exchange of shares contemplated under the foregoing provision. The transfer nf the subiect shares is made pursuant to the Supreme Court's Decisions in G.R. Nos. made in order to give effect to the Supreme Court's Decisions, is not subject to capital 2012 dated April 13, 2012) The above-cited provision finds no application in this case since it does not and 1d G.R. No mandating UCPB to cancel

Donor's Tax

donor's tax applies, whether such transfer is in trust or otherwise, whether the gift is imposed on the transfer by any person, resident or non-resident, of property by gift. The donor, (2) the increase in the patrimony of the donee, and (3) the intent to do an act of Tiberality (animus donandi) direct or indirect, and whether the property is real or personal, tangible or intangible. The essential elements of a valid donation are: (1) the reduction of the patrimony of the Section 98 of the Tax Code of 1997 provides that a donor's tax is generally

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owners of the shares as the transfer was made in compliance with the Supreme Court's Decisions. The transfer of the legal title to the Republic of the Philippines is only a In this case, there is no intention to donate on the part of the UCPB or the former

confirmation of its ownership over the said shares, and there is no donative intent or act of tiberality involved on the part of UCPB or the former owners. (BIR Ruling No. 058. 2013 dated February I, 2013 and BIR Ruling No. 247-2012 dated April 13, 2012)

Documentary Stamp Tax

The transfer of the subject shares by UCPB in favor of the Republic of the Philippines is likewise not subject to documentary stamp tax imposed under Section to setl or memorandum of sale, or delivery or transfer contemplated under Section 1 75 of the Tax Code. However, the notarial acknowledgement on the Deed of Compliance 175 of the Tax Code of 1997, as amended, considering that there is no sale, agreement

is subject to the documentary stamp tax under Section 188 of the same Code. (BIR Ruling No. 058-2013 dated February 1, 2013 and BIR Ruling No. 247-2012 dated April 13, 2012)

Officer to issue the corresponding Certificate Authorizing Registration (CAR) so that UCPB can transfer the subject shares of stock in the name of the Republic of the Philippines. This will. therefore, serve as authority for the concerned Revenue District

However, if upon investigation, it will bc disclosed that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented

Very truly yours. t8uowAy

Commissioner of Internal Revenue CAESAR R. DULAY 012237 K-1