BIR Ruling No. 343-2022

REPUBLICOF THE PHILIPPINES

DEARTMENTOF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

BIR Ruling No.75-2018 Sec.40(C)(2)&(6)(b of Tax Code, as amended BIR Ruling No.214-2012 BIR Ruling No.100-2017 S40M343-2022

JUN 3 0 2022

MATA-PEREZ TAMAY O FRANCISCO Unit 15A Act Tower.135 I.Dela Costa St. Salcedo Village. Makati C ty

t ntionAttys.Euney Marie J.Mata-Perez

Richelle Di nne R.Patawaran

Aziza Hannah A.Bacay and

Gentlemen:

This refers to your eter request on behalf of your clients, RFM Corporation (RFM). and its former subsidiaries.Invest A ia Corporation(IACInterbake Commissary CorporationICC and Cabuyao Logistics and Inlustrial Center. Inc. (CLIC) for confirmation that the merger of IAC. ICC.and CLIC.as the abs rb d corporations.with RFM.as the surviving corporation.qualifies as a tax-free merger under Sec io 40(C2 and6b of the National Internal Revenue CodeTax (ode of 1997.as amend d.

Backgroumd.

The parties involv I in the above-nentioned merger with its respective principal addresses and Taxpayer IdentificatioMo. (TIN). are as follows:

Cabuyao Logistics and In lu trial Invest Asia Corporat on Interbake Commissay RFM Corporation Corporation RFM Name Center.Inc RFM Corporate Center, Pioneer cor. Sheridan Streets,Mandaluvong City Sheridan Streets. Mandaluyong City RFM Corporate Center, Pioneer cor Sheridan Streets.Mandaluyong City RFM Corporate Center.Pioneer cor Sheridan Streets. Mandaluyong City RFM Corporate Center.Pioneer cor Principal Address TIN

RFM is a publicly-l st d company which owned various ubsidiaries,namely:IAC.ICC and

(95.99%). Hyland Realty ( orporation and Foresight Realty Dev elopment Corporation each own 2% ofIAC. CLIC. CLIC and ICC w re wholly-owned by RFM,while IAC was majority-owned by RFM

shares to itself - as the su vi ing corporation - in exchange for the assets transferred to it by its former subsidiaries as a r sult of the merger. With the RFM as the surviving corporation. the subsidiaries ceased to exist ard their legal personalities were considered terminated. The merger is seen to be desirable and id antageous to the parties and their respective shareholders for the following business reasons Through an "upstre. m merger between the RFM and its; former subsidiaries. the RFM issued

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1. The integratioi o the administrative facilities of the four (4) corporations will result in

economies of s cale and efficiency of operations: The consolidation of assets o the four (4 corporatins will allow the procurement of financing and redit facilities under more favorable terms: and 3 The merger win ake possible the more productive us of the properties of the constituent

corporations.

common shares. at an issi e price of P June 25.2018 and Septer br 7.2018.the Board of Directors and the Stockholders approved the The RFM issued itself and to the minority shareholders of IAC a total of per share. or a total consideration of P On

issuance of the above-mer tioned number of shares to the stockholders of the absorbed corporations. the allocation of which is s follows:

Name of Stockholdes Nationality Number of Shares Subscribed Subscribed (in PhP) Amount of Shares

Foresight Realty Develo oment Hyland Realty Corpor ticn RFM Corporation(s stockholder of CLI( RFM Corporation(s RFM Corporation (s stockholder of IAC stockholder of ICC TOTAL Corp. Filipino Filipino Filipino Filipino Filipino

The Articles of Meg: r and Plan of Merger were executed by the constituent corporations on September 11.2018.

As of June 30. 201 8 the constituent corporations had the following assets. liabilities and equity:

RFM Assets (in PhP Liabilities (in PhP) Equity (in PhP)

Interbake Commissary Corporation Cabuvao Logistics and ndustrial Invest Asia Corpor iti n RFM Corporati n

Center.Inc.

The details of the C onstituent corporations' excess and unexpired Minimum Corporate Income TaxMCITunusdreditable Withholding TaxCW1.and unused input VAT.as of June 30.2018 are as follows:

Interbake Commissary C Cabuyao Logistics and Invest Asia Corpor tion RFM Corporatin Center. Inc. RFM ndustrial orroration MCIT(in PhP) Unexpired Excess and Urused CWT (in PhP) VAT (in PhP) Unused input

of Filing of the Articles an I I lan of Merger. The Securities and Ex change Commission (SEC) issued on January 31.2019. the Certificate

Based on the foreg ir representations. you now request for confirmation that:

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The transfer of pr operties of IAC. ICC. and CLIC to the RFM qualifies as a tax- free exchange pursuant to Section 40(C2 in relation to Section 40(C(6(b of the Tax Code.s mended.This transfer of properties is pursuant to an upstream merger betwe n the RFM. as the surviving en ity and its subsidiaries. Accordingly.nincome tax.value-added taxVAT.and donor's tax can be due on the transfer.

2.The excess an unexpired MCIT.unused CWT. and unused input VAT of the

absorbed comr inies will be transferred to the survivirg RFM.

In reply thereto. pl as e be informed as follows:

1. The foregoing n erger of IAC. ICC. CLIC and RFM is a merger within the contemplation of Section 40(C(2)ain -elhtion to Section 40(C(6(b of the Tax Code of 1997. as amended. for the following business re iscns: (1 the integration of the administrative facilities of the four (4 corporations will result in economies of scale and efficiency of operations:(2 the consolidation of assets of the four (4 corp rations will alloo the procurement of tinancing and credit facilities under more favorable terms:and3the merger will make possible the'more productive use of the properties of the constituent corporat ons. Hence. themerger of IAC.ICC.(LIC and RFM is being undertaken for a bona fide business purpose and not for the purpose of escaping the burden of taxation.

The merger of IA(. ICC. CLIC and RFM qualifies for non-recognition of gain or loss for income tax purposes in acordance with Section 40(C2 of the Tax Code of 1997,as amended.that no gain or loss shall be rec gnized by IAC.ICC.and CLIC.as transferors of all assets and liabilities. 1e RFM pursuant to the A icies and Plan of Merger.

Accordingly.no g in or loss shall be recognized by RFM. as the transferee. on its receipt of the assets and liabilities ot IAC.ICC.and CLIC pursuant to and s a consequence of the merger

On the other hand. he bases of the shares of stocks to be received by the shareholders of IAc ICC.and CLIC upon the e: ch ange shall be the same as the bases of the properties,stocks or securities exchanged. decreased by(l the money received.and 2 the fair market value of the other property/ies received and i ncieased by(a the amount treated as dividend of the shareholders and (b the amount of any gain th t as recognized in the exchange.(Sec.+0(C(5)(a of the Tax Code of 199.asamended

The basis of the pr pe rties transferred in the hands of the transferee (RFM) shall be the same as it would be in the hand ot the transferors IAC.ICC.and C[IC increased by the amount of the gain.if any.recognized to htransferorsIAC.ICC.and CLICon the transfer.Sec.40(C)5(b supra)

Finally, if the amot nt of the liabilities assumed plus the amount of the liabilities to which the property is subject exceed he total of the adjusted basis of the properties transferred pursuant to such exchange. then such exces shall be considered as a gain.on th part of the transferor,from the sale or exchange of a capital as et or of properfy which is not a capital asset. as the case may be. (Sec. 40 C4(b.supra)

The substituted ba is of the properties transferred by IAC.ICC. and CLIC to RFM shall comply with the rule that -a h and other cash items will be excluded from the computation of the

pursuant to No. IV(A)(2) f R evenue Memorandum Ruling (RMR) No. 2-2002 dated June 10. 2002. adjusted basis of the prop rti s transferred for purposes of detemining whether liabilities assumed and to which the property is subject do not exceed the adjusted basis of the property transferred

transferred bv IAC.ICC.and CLIC to RFM.based on IAC.ICC.and CLIC's audited financial Accordingly. the leated shares and liabilities. and the substituted basis of the assets

statements as of June 30.213 shall be as follows

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INVEST ASIA CORPORATION JUN 3 0 2022

(in Php) Amount Allocated Liabilities Allocated Shares Basis(in Php) Substituted

Cash and Cash Equivalent Receivables

Other current asses

Properties Held-to-maturity assets Investment Other non-current investment

TOTAL

Liability Amount(in Php) Accounts p tyable and other liabilities

TOTAL Security de posits Deferred in ome tax liability Due to a rel ited party

CABUYAO LOGISTIS and INDUSTRIAL CENTER,INC

(in Php) Amount Liabilities Allocated Allocated Shares Basis(in Php) Substituted

Cash in Bank Other current assets

Property. plant and Property. plant and equipment(at appra se value) equipment (at cost) TOTAL

TOTAL Accrued Fpnses and Liabilities Advances f Deferred in orne tax liability f om Parent Cornpany Liability Other Current Amount(in Php)

INTERBAKE COMM SS ARYCORPORATION

Cash on hand and banks Receivables (in Phn) Amount Allocated Liabilities Allocated Shares Basis(in Php) Substituted

2

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Inventories

Other current asse

Property and equipment Deferred tax asset Other non-current assets TOTAL

Dividends ayable Retirement benefit liability TOTAL Accounts p yable and accrued liabilities Liability Amount (in Php)

and (3) the intent to do a at of liberality (animus donandi). are:(1) the reduction of th patrimony of the donor.2 the increase in the patrimony of the donee. 2. Well-settled in our jurisprudence is the fact that the e.ssential elements of a valid donation

CLIC to donate to RFN its assets since the transaction is purely for legitimate business purpose. transaction is a bonafide m rger effected solely for business reasons. Thus. the aforesaid merg r vill not be subject to gift tax since there is no intention to donate.and the Clearly, there is no intention on the part of any of the parties to the merger -IAC.ICC. and

amended.(BIR Ruling \40-042--2020 dated July30.2020 199(m) of the Tax Code of 1997.as amended.in relation to Section 40(C2 of the same Code.as 3. No DST is due n he transfer of assets made pursuant to the Plan of Merger under Section

imposed on the original ssnance of shares by RFM to the stockholders of IAC,ICC.and CLIC as a consequence of the merg r is provided uinder Section 174 of the Tax Code of 1997.as amended. However.a DST a thrate of P2.0 on each P200 par valueor fractional part thereof.shall be

shall not be subject to an.o itput tax. pursuant to Section 4.106-8(b)(3) of Revenue Regulations (RR) No.16-2005.as amend d hy RR No.4-2007,as further amended by RR No. 10-2011.and last amended by RR No.4-221.The conveyance of properties to effectuate a merger is not made in the course of business but b operation of law pursuant to the merger. Thus,any unused input tax as of the effective date of m rger will be absorbed by RFM.as the surviving corporation pursuant to Section 4.106-8b(3)of RINo.16-2005.as amended by RRs No.4-2007:10-2011 and4-2021. 4. The transfer of pr perties of IAC. ICC. and CLIC to RFM as a consequence of the merger

by the latter against its ii come tax liabilities for 2019 and succeeding years or may be the subject of a claim for refund or is uance of a tax credit certificate (TCC.BIR Ruling No. 100-201-dated the assets to be transferi d by IAC.ICC.and CLIC as of the effective date of the merger shall be transferred to and vested in RFM.as the surviving corporation.and such excess CWT may be utilized March2.2017 5. Any excess and un itilized creditable withholding taxes (CWT.if any.which form part of

corporations.IAC.ICC.ar d CLIC.if any.as of the effective date of the merger shall be carried three (3 immediately si c eding taxable years pursuant to Section 27E2 of the Tax Code.as amended. Since the ex e s and unexpired MCIT of IAC.ICC. and CLIC.is among the rights forward and credited ag in t the normal income tax due of the surviving corporation,RFM. for the privileges.property and r interest of IAC.ICC.and CLIC.the excess and unexpired MCIT of the iatter absorbed corporati on shall be transferred to and vested in RFM on the effective date of the 6. The excess and unexpired Minimum Corporate Ineome Tax (MCIT) of the absorbed

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credited against the nor nal corporate income tax of RFM subject to the three-year-carry-forward period reckoned from th. dnte of paymenit of IAC. ICC. and CLIC of its MCIT. merger.Thus.IAC.IC.and CLIC's excess and unexpired MCIT shall be carried forward and

IAC.ICC.and CLIC.it any.is not one of the assets that can be transferred and absorbed by the Section 34D3 of thea Code of 1997.as amended.and as implemented by RR No.14-2001.of 7. It is to be empl isized. however. that the net operatir.g loss carry-over (NOLCO) under

surviving corporation.R M.as this privilege or deduction can be availed of by IAC.ICC.and CLIC only.Accordingly.the ta-free mergebetween IAC.ICC,CLIC and RFM does not cover the NOLCO of the absorbed ccrporations.

following requirements et forth under RR No. 18-2001 40(C2 and6bof he Tax Code.a amended.the parties t the merger should comply with the In order that the ibove-described reorganization can be considered as merger under Section

A. The plan of reorg ini zation should be adopted by each of the corporations.parties thereto.the reorganization. hall file. as part of its return for the taxable year within which the reorganization o curred a complete statement of all facts pertinent to the non-recognition of gain or loss in co nn ction with the reorganization. including: adoption being s hon by the acts of its duly constituted responsible officers and appearing upon the officia records of the corporation. Each corporation, which is a party to the

1. A copy of t ie plan of reorganization, together with a statement executed under the penalties of oerjury. showing in full the purposes thereof and in detail all transactions incident to.r pursuant to the plan:

2.A complete tatement of all cost or other basis of all property.including all stocks or securities. tr: nsterred incident to the plan:

3. A statement of the amount of stock or securities ard other property or money received from the ex hange. includinig a statement of all distribution of other disposition made thereof. The mount of each kind of stock or securities aid other property received shall be stated on he basis of the fair market value thereof at the date of the exchange;

4.A statement of the amount and nature of any liabilities assumed upon the exchange.and the amount nd nature of any liabilities to which any f the property acquired in the exchange is uhiect.

B. Every taxpayer. ther than a corporation. party to the reorganization.who received stock or recognition of ga n er loss upon such exchange. includ ng: securities and ot'iei property or money upon a tax-free exchange in connection with a corporate reorgarization shall incorporate in his income tax return for the taxable year in which the excha ige takes place a complete statement of all facts pertinent to the non-

l.A statementf the cost or other basis of the stock or securities transferred in the exchange: ad

2. A statement in full of the arnount of stock or securities and other property or money received froi the exchange. including any liabilities assumed upon the exchange. and any liabilitie t which property received is subject.The amount of each kind of stock or securities an oher property (other liabilities assurned upon the exchange received shall be set forth pon the basis of the fair market value thereof at the date of the exchange.

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C.Records in sut stantial form shall be kept by every taxpayer who participates in a tax-free

exchange in c nr ection with a corporate reorganization showing the cost or other basis of the transterred property or money received (including any liabilities assumed on the exchange.r iny liabilities to which any of the properties received were subject).in order to facilit ite the determination of gain or loss from subsequent disposition of such stock of securi ies and other ptoperty received from the exchange.

In addition to the foregoing requirements. the parties shall enclose with their respective income tax returns for the axable year in which the merger occurred a copy of the request for ruling filed with.and the corresponding ruling issued by.the Bureau of Internal Revenue.both duly stamp- received by the appropriat : ot fice of the Bureau of Internal Revenue.

Such parties shall include as a note to their respective audited financial statements for the taxable year in which the merger occurred a statement to the effect that they hold such assets/shares acquired in a merger and the year in which such merger occurred, and in the taxable years until the subject properties are subs squently transferred to another transferee.

Moreover.thesh ureholders of theabsorbed/dissolving.. corporationandthe surviving/transferee corp ration shall record in their respective books of accounts the mandatory accounting entries statedn\nnexAhereof.pursuant to Reenue Memorandum Order (RMO No. 17-2016.

The parties shall ause to annotaie at the back of the Transfer Certificates of Title and Certificates of Stock. the date the merger was executed, the original/historical/adjusted costs of acquisition of the properi es or shares of stock involved. and the fact that no gain or loss was recognized as a result of st ch merger: provided however. that any violation by the Corporate Secretary of this condition hall be penalized under Section 275 othe Tax Code of 1997.as amended. ft is further required that w ithin ninety90 days from receipt of this ruling. the parties to the transaction must submit t the Law and Legislative Division. Bureau of Internal Revenue.proof of annotation of the original nistorical/adjusted bases of the properties and/or real properties involved in the transfer and certifie trle copies by the Corporate Secretary,of duly annotated Certificates of Stock. in respect of the sh re of stock of the transferee corporation. including the revised allocation of shares and re-computat on of the substituted bases of the properties which shall be in accordance With RMR No. 2-2002

This ruling is bein i sued on the basis of the foregoing facts as represented. However. if upon investigation. it will e lisclosed that the facts are different.then this ruling shall be considered null and void.

Very truly yours.

1te,omyay

Commissioner of Internal Revenue CAESAR R.DULAY 0521

K-1 psACICC.CLIC-RFM merger

PROFORMAENTRIES ERGER AnnexA

Particulars The entry/ies shall be per irii tal shareholder of the absorbed corporation Indivi ual Shareholders' Bock Transferee's Book JUN 3 0 2022

Entry to Record the Journal Tax-Free I xchange Investment in(name oftr.isfee Investment in (name Dividend Income (net fI T on dnidend dioling corporation MNM YxxPPE-Land&mprovementfor real props Others Assets(as applicable Investment ir.(issuing corp. for shares of stock) Liabilities Capital Stock Additionil Paid-In Capital XXXXX XXX XX XXX xX XXXXX XXX.XX XXX X

(share pe shares of(narng corporationswith type and no of share of To record the Ta-Free EhaTFEof investment in Malue ofp aggregate fair market valuof per shar of transferee with par in exchanze for investment in (share type) shares of (name issuing corp/s) and other asset with aggregate fair market value of merger. in exchange for type and no of share of (name of To record the Tax-Free Exchange (TFE of real properties. transfereewtt par value ofP including liabilities assumed resulting from per share Bilance Sheet Notes Fntn Investment includes value of p from the Ta-Free Extan of investment in ncand type of share s) of (iss were acquired for the and which have fair n rk exchange amountingip Stock Certificate No Inm ta ost ofsubstituteds alue as of the date of of transferee resultitig I tpe of share s wath par orporation s coverec b wh el name of tiansferee of the investment/s amounts to shares in e name of name of transferee Real prore ties investment in no.and ty pe of share s of (issuing corporation/s) and other assets were acquired through rierger as evidenced by Plan of Merger and Authoriz Capital Stock of (name of transferee approved ty the Securities and Exchange Commission FMV at he time of exchangeThe real properties. investmet's and other assets were previously covered b Transt Certificate of Title and Stock Certificate are now p resently covered by Stock Certificate No s Articles f Merger including the increase of the on (dateThe total acquisition cost/substituted cost to No's. constituting no. and ty pe of share s [total] issued by(issuing corporation/s) and

Subsequent Sae Proforma Entries to Record Transter Cash or Accounts recervat thru Tax-Free Fchange To record subsequent sale tr fer of investment acquired Current Investment in (name Gan on Sale of Inves Tax Payable tr L feree N XX XX XAX Xxx xx[ XXX Xx investment's ond or other assets acquired thru Tax-Free Current Cash or Acco ts receivables To record subsequent sale / transfer of real properties. Investment in (name of issuing corporation)PPE Land & Linbrovement / Other Assets Gain on Sa e of Investment Tax Pava XYXAX XXX.XN XXX XX XXX XX XXX XX

Provision for Tax as follo Provision for aas follows a

Tax Ty pe Tax Rate Mullif ly By Amonnt Tax fype Tax Rate Multiply By Amount

the taratecused in TransactenI et Capitat Grans T Stock Transacton T et Capral Gans T TT ton f Net Capital Gan Tand St n Pino 12 of Snertess hange shall appi Gans teat ed or subsevfcent sale FMV of ins est nent. invesinont at the the linte orTFE Setlint Price trc o TFE n OR [Withh oiding Tax. e Cap tal Gains Tas Stock Tansaction Ta Docurnentan Stamp Tas (D T) Vatue A dded Ta AT Total Tx Payable ONE Total Tax Payable Tax Type toperRRNo and fractional part thereo forenP1 of Ratc 2 12 I5a Sub<equent sale Gains realired on Value (FMV) of subsequent sale of investment s Selling Price of the property tes at the time of invesiment at the Subseque Multiply By Fair Marker time of transfer Anoun 3333 33.3 M A

Cmputaton oGan Less CostSun Seling Pnte 3 EM the e of subsequent saletranfer rfers to the ellng pnconal alur the alue reflected in the a decaratonhicheer is hihe s subiect to NormalCorporate Income Ta(NCIT

PaRM

edt he ton

the am ohe tansterred the amou BTarNL oCrsL wcdwa.amdch shars Pu

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