BIR Ruling No. 361-2021

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

1-61-22 0CT 0 4 2021 Sec. 29, NIRC & RR 2-2001 BIR Ruling 25-2002 BIR Ruling No. 094-2013 BIR Ruling No. 435-19

Platon Martinez Flores San Pedro & Leano Law Offices 6th Fioor Tuscan Building 114 V.A. Rufino Street Legaspi Village 1229 Makati City

Attention: Atty. Anthony Brett M. Abenir

Gentlemen:

Sandvik Philippines, Inc. (SANDVIK) and Sandvik Tamrock (Philippines), Inc. (SANDVIK TAMROCK) for confirmation that: This refers to your letter dated March 19, 2018 requesting on behalf of your ctients.

owned by more than twenty (20) individuals, thus SANDVIK cannot be considered a closely- held corporation but rather a publicly-held corporation exempt from the imposition of Improperly Accumulated Earnings Tax (IAET) under Section 29 of the National Interna? Revenue Code of 1997, as amended. 1) Fifty percent (50%) of the issued and outstanding capital stock of Sandvik is

be considered a closely-held corporation but rather a publicly-heid corporation exempt from IAET under Section 29 of the Nationat Internal Revenue Code of 1997, as amended. Tamrock is owned by more than twenty (20) individuals. thus SANDVIK TAMROCK cannot 2) Fifty percent (50%) of the issued and outstanding capital stock of Sandvik

Background

I. Sandvik (TIN: 000- cor. 25th Street, Bonifacio Global City, Taguig City. Metro Manila. existing under Philippine laws. Its primary purpose is "to engage in the marketing at wholesale." It is located at Unit 1004 One Global Place Building. 5:h Avenue. or general merchandising of Swedish quality steel and tungsten carbide products. finished or unfinished, and or any and all kinds of goods, wares and merchandise. 100) is a domestic corporation duly organized and

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stock with par value of PhP100.00 each. It is a foreign-owned subsidiary of Its authorized capital stock is PhP17.853,200.00 divided into 178.532 shares of Sandvik South East Asia Pte. Ltd. (Sandvik SEA)'.

The foliowing are the stockholders of record of SANDVIK2:

Kenneth Chan Keng Lek Lim Jiun Horng, John Jose Pacis Flores Carlos G. Platon Rosario P. Balatbat Sandvik SEA Total Name No. of Shares 178,532 178,527 { 1 1 1

2 Sandvik Tamrock (TIN: trading, marketing, or general merchandising at wholesale, servicing or organized and existing under Philippine laws. Its primary purpose is "to engage in It is located at Unit 1004 One Giobal Place Building, 5th Avenue, cor. 25th Street. Bonifacio Global City, Taguig City.3 manufacturing of any and all kinds of equipment, goods, wares and merchandise. is a domestic corporation duly

Hundred Pesos (PhP100.00) each. it is a foreign-owned subsidiary of Sandvik Finance. Its authorized capital stock is Sixteen Million Pesos (PhP16,000,000.00) divided into One Hundred Sixty Thousand (160,000) shares of stock with par value of One

The following are the stockholders of record of Sandvik Tamrocks:

Jose Pacis Flores Carlos G. Platon Hector A. Martinez Rosario P. Balatbat Sandvik Finance George Yap I Total Name No. of Shares 152,604 152,599 3 - -

3 Sandvik SEA is a Singaporean company located at 50 ALPS Avenue #04-00

wholly-owned subsidiary of Sandvik Finance B.V. (Sandvik Finance). Its capital Sandvik Building, Singapore. It is authorized to engaged in general wholesale trade including importers and exporters and wholesale on a fee or contract basis. It is a

4 2017 GIS of Sandvik Tamrock. $ Corporate Secretary's Certificate issued by Atty. Hector A. Martinez dated 22 February 2018. 1 2017.General Information Sheet (GIS) of Sandvik. 2 2017.General Information Sheet (GIS) of Sandvik. 3 Amended Articles of Incorporation of Sandvik Tamrock.

C: Sandvik Philippines, Inc. / Sandvik Tamrock (Philippines), Inc. Page 3 of 6 CT0R2

structure are as fotlows":

Issued Share Capital

13,000,000 Amount No. of Share 13,000,000 Singapore, Dollars Currency Share Type Ordinary

Paid-up Capital

13.000,000 Amount Singapore, Dollars Currency Share Type Ordinary

Shareholders

Sandvik Finance Name Netherlands Nationality No. of Share 13,000,000 Singapore, Dollars Currency

4. Sandvik Finance is a corporation organized and existing in accordance with the

Hundred Fifty-Four Thousand Six Hundred Euro (EUR8.454.600.00) comprising of Eighteen Thousand Four Hundred Eight (18,408) ordinary shares, having a taws of the Kingdom of the Netherlands with the official seat of the company in Schiedam. the Netherlands. The issued capital of the company is Eight Million Four nominal value of Four Hundred Fifty Euro (EUR450.00) each; and Three Hundred Eighty (380) Preferred Shares, having a nominal value of Four Hundred Fifty Euro (EUR450.00) each.7

It is a wholly-owned subsidiary of Sandvik Aktiebolag (Sandvik AB)8, to wit:

Stockholders Subscribed with EUR450/Share No. of Shares Par value of Ownership % of Position Citizenship

Sandvik AB Sandvik AB 18,408 380 100% 100% Preference Regular shares shares Sweden Sweden

5. Sandvik AB is registered as a public limited liability company in Sweden with registered office in Stockholm. Sweden." Its largest stockhoiders"" are as follows:

I. AB INDUSTRIV ARDEN 11.8%

9 Authenticated e-Certificate of Registration of Sandvik Aktiebolag with the Swedish Companies Registration 10 Authenticated Euroclear Snapshot for Sandvik AB Authenticated Business Profile of Sandvik SEA extracted from lodgements filed with the Accounting and 7 Authenticated Amendment to the Articles of Incorporation of Sandvik B.V. dated 1 July 2016. 3 Authenticated Certificate issued by Peter Weber and Malika Algafafi. Office. Corporate Regulatory Authority in Singapore. M

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20. CARL BENNET AB 15. LIVFORSAKRINGSBOLAGET SKANdIA 17. CBNY-NORGES BANK 18. STATE STREET BANK & TRUST COM., BOSTON 19. Folksam 10. Nordea Investment Funds 1l. Goranssonska Stifelserna I2. STATE STREET BK-WEST CLIENT/EXEMPT 13. STATE STREET BK-WEST CLIENT/TREATY 14. PENSIONKASSAN SHB FORSAKRINGSFORENING 16. CLEARSTREAM BANKING S.A., W8IMY 3. AMF -- FOrsakring och Fonder 4. Handeisbanken Pension 6. LUNDBERGFOREGATEN AB, L E 7. SEB Investment Management 8. JPM CHASE NA 2. ALECTA PENSIONSFOrSAKrING, OMSeSIdIGT 5. Swedbank Robur fonder 9. FJARDE AP-FONDEN 0.0% 0. % 0.8% 0. 9% 0.9% 0.9% 6.1% 2.5% 2.4% 1.8% 1.4% 1.3% 1.2% 1.0% 2.% 2.6% 1. % 1.4% 1.( %

6.SANDVIK and SANDVIK TAMROCK have no pending tax audit case.1

to accumulate instead of dividing them among or distributing them to the shareholders. and as implemented by RR No. 2-2001, provides that in addition to other taxes imposed by tax equal to 10% of the improperly accumulated taxable income of corporations formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting the earnings and profits of the corporation Title H of the Tax Code of 1997, as amended, there shall be imposed for each taxable year a In reply, please be informed that Section 29 (B) of the Tax Code of 1997, as amended.

Thus, this Office held in BIR Ruling No. 435-19 dated August 2, 2019:

of the Tax Code on the imposition of IAET, states that - -"In repiy thereto, please be informed that Section 29 (A) and (B) (2) (a)

Tax. SEC. 29. Imposition of Improperly Accumulated Earnings

(A) In General. - In addition to other taxes imposed by this described in Subsection B hereof. an improperly accumulated earnings tax equal to ten percent (10%) of the improperly accumulated taxable income of each corporation improperly accumulated taxable income. Title, there is hereby imposed for each taxable year on the

(B Tax on Corporations Subject to Improperly Accumulated

Earnings Tax.

11 Certification from RDO 44, Taguig-Pateros dated July 6, 2020.

Sandvik Philippines, Inc. / Sandvik Tamrock (Philippines), Inc. Page 5 of 6 Li-is JCT42

(1) In General. --- The improperly accumulated earnings tux or the shareholders of any other corporation, hy heing divided or distributed. inposed in the preceding section shall apply to every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders permitting earnings and profits to accumulate instead of

(2) Exceptions. -- The improperly accumulatedearnings tax as provided for under this Section shall not apply to.:

(b) Banks and other non-bank financial intermediaries: (a) Publicly-held corporations. and (c) Insurance companies.

the IAET shall not appiy to, among others, publicly-held corporations. corporation for the improper accumulation of its earnings, and as a form of deterrent to the avoidance of tax upon shareholders who are supposed to pay dividends tax on the earnings distributed to them by the corporation. However. This kind of tax is being imposed in the nature of a penalty to the

Section 29 of the Tax Code of 1997,' provides: -"Implementing the Provision on Improperly Accumulated Earnings Tax under Furthermore, Section 4 of Revenue Regulations No. 2-2001.

corporations are those corporations at ieast fifty percent (50%) in (50%) of the total combined voting power of all classes of stock than twenty (20) individuals. Domestic corporations not failing under the aforesaid definition are, therefore. publicly-held] value of the outstanding capital stock or at least fifty percent entitled to vote is owned directly or indirectly by or for not more corporations. For purposes of these Regulations, closely-held

corporation. partnership. estate or trust shall be considered as being owned corporation, it is provided that stock owned directly or indirectly by or for a proportionately by its shareholders, partners or beneficiaries." For purposes of determining whether the corporation is a closely-held

indirectly by or for more than twenty (20) individuals. (Section 4, RR No. 2-2001) percent (50%) in value of the outstanding capital stock or at teast fifty percent (50%) of the total combined voting power of atl classes of stock entitled to vote is owned directiy or Stated differently, to be a publicly-held corporation, it is essential that at least fifty

is ultimately traced to the individual shareholders of the parent company. Accordingly. where at least 50% of the outstanding capital or at least 50% of the total combined purposes of determining whether it is a closely-held corporation or a publicly-held corporation This Office had occasion to rule that the ownership of a domestic corporation for

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voting power of all classes of stock entitled to vote in a corporation is owned directly or indirectly by at least 21 or more individuals, the corporation is considered a publicly-held 2002 and BIR Ruling No. 094-2013 dated March 18,2013) corporation as the term is defined in RR No. 2-2001. (BIR Ruting No. 25-2002 dated June 25.)

corporation which is 99.99% owned by Sandvik Finance which is a wholly-owned subsidiary domestic corporation which is 99.99% owned by Sandvik SEA which is a wholly-owned On the other hand, the GIS of SANDVIK TAMROCK will show that it is a domestic of Sandvik AB. subsidiary of Sandvik Finance which, in turn, is a wholly-owned subsidiary of Sandvik AB. A perusal of the General Information Sheets (GIS) will show that SANDVIK is a

of both SANDVIK and SANDVIK TAMROCK. determining whether these are closely-held corporations or publicly-held corporations is ultimately traced to the individual shareholders of Sandvik AB, the ultimate parent-company Therefore, the ownership of SANDVIK and SANDVIK TAMROCK for purposes of

stock entitled to vote is owned directly or indirectly by twenty-one (21) or more individuals.'2 outstanding capital stock or at least 50% of the total combined voting power of all classes of Sandvik AB is a publicly listed company in Sweden. At least fifty percent (50%) of the

or at least 50% of the total combined voting power of all classes of stock entitled to vote is to Sandvik AB, a corporation where at (east fifty percent (50%) of the outstanding capital stock shares of SANDVIK; 2) Sandvik Finance owns 99.99% of the shares of SANDVIK owned directly or indirectly by more than twenty (20) individuals. SANDVIK TAMROCK are publicly held corporations as contemplated under Section 29 (B) of the Tax Code of 1997, as amended, considering that: 1) Sandvik SEA owns 99.99% of the TAMROCK: and 3) the ownership of Sandvik SEA and Sandvik Finance is ultimately traced Applying the above-cited test under Section 4 of RR 2-2001, SANDVIK and

and SANDVIK TAMROCK are publicly held corporations exempt from the imposition of IAET under Section 29 (B)(2)(a) of the Tax Code of 1997, as amended. IN VIEW OF THE FOREGOING, this Office confirms your opinion that SANDVIK

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

Very truly yours.

3

Commissioner of Internal Revenue CAESAR R. DULAY

K- 21533

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12 Authenticated Euroclear Snapshot of Sandvik AB for 2017.