BIR Ruling No. 307-2016

REPUBUCOFTHE PHILIPPINES

DEPARTMENT OF FINANCE BUREAUOFINTERNALREVENUE

Quezon City

Section NIRC 127(A) Revenue Regulations Nos. 6-2008& 307-2016 Person to Contact: Chief. Law Division Tel Nos. 926-5536/927-09-63

16-2012

Date:June 28,2016

No.40 San Miguel Avenue Mandaluyong City SAN MIGUEL CORPORATION

Attention: Ferdinand K. Constantino Chief Finance Officer

Gentlemen:

This refers to your undated letter requesting confirmation that the trading of

to the stock transaction tax under Section 127A of the 1997 Tax Code.as amended. listed preferred shares of stocks with the Philippine Stock Exchange (PSE) is subject

diversification accounted for, in 2015, approximately 5.1% of the gross domestic product of the country; that in order to sustain and continue its growth strategy, SMC capital market; that with the availability of such funding sources, SMC is issuing largest business conglomerates, continues to grow and diversify and such growth and has tapped various funding resources from the local loan market and the international Peso-denominated preferred shares by its maior subsidiaries, initially SMC Globa It is represented that San Miguel Corporation (SMC) as one of the country's

Holdings Corp.(holding company for the Infrastructure Business. collectively referred hereafter as Subsidiaries"and that by way of compliance with existing and Power Holdings Corp.(the holding company for the Power Business)and San Miguel

applicable statutes and regulations. the preferred shares will be structured to be non-

redeemable at the option of the issuer. voting, cumulative,non-participating.non-convertibleto common shares and

to SMC.advised that, while the PSE's Listing Rules do not expressly provide a It is further represented that the Philippine Stock Exchange PSE),in its letter

specific reguirement that only companies with listed common shares can list preferred

shares, the listing and availability for public ownership of common shares is a key characteristic of publicly held companies because ownership of such shares gives the public the right to participate in the election of members of the Company's Board of

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Directors, as well as participate in the Company's major corporate decisions through

the exercise of voting rights: and that in the same letter, PSE confirmed that for

purposes of determining the minimum public ownership (MPO) requirement, only the

company's listed common shares are considered.

Based on the foregoing representations, you now request for confirmation of

the following:

l. that for as long as the/preferred shares of stocks are listed, the

trading thereof through the Local Stock Exchange will be subject to

the stock transaction tax of /% of 1% of the gross selling price,or

gross value in money of the shares of stocks sold. as provided under

Section 127(A of the 1997Tax Code,as amended;and

2. that the provisions of Revenue Regulations (RR No. 16-2012is

limited to the /sale and transfer of the listed common shares of

publicly-listed companies through the Local Stock Exchange.

In reply. please be informed that the sale or trading of listed shares of stocks

through the Local Stock Exchange is subject to the stock transaction tax of /2% of 1%

of the gross selling price, or gross value in money of the shares of stocks sold

pursuant to Section 127(A of the 1997 Tax Code,as amended.The aforesaid Section

states:

SECTION 127. Tax on Sale, Barter or Exchange of

Shares of Stock Listed and Traded through the Local Stock

Exchange or through Initial Public Offering. -

Listed and Traded through the Local Stock Exchange. - (ATax on Sale,Barter or Exchange of Shares of Stock 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.

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The above provision is being implemented by RR No.06-2008 (Consolidated

Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock Held as Capital Assets dated April 22,2008,relevant

portions of which state:

"SECTION 5.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 of securities,

under the following rules:

a Tax Rate.- A stock transaction tax at the

rate of one-half of one percent (1/2 of 1%) based on the amount determined in subsection (b) hereunder.

b Tax Base.-Gross selling price or gross

value in money of the shares of stock sold. bartered, exchanged or otherwise disposed which shall be assumed and paid by the seller or transferor through the remittance of the stock transaction tax by the seller or transferor's broker.

Thus.based on the foregoing provisions.the sale,barter or exchange of shares of stock listed and traded through the local stock exchange shall be subject to / of 1%

based on the gross selling price or gross value in money of the shares of stock sold Accordingly, we hereby confirm your opinion that since the preferred shares of stocks are listed, the sale, barter or exchange thereof through the Local Stock Exchange is subject to the stock transaction tax of /2% of 1% of the gross selling price, or gross value in money of the shares of stocks sold in accordance with Section 127(A of the

1997 Tax Code,as amended.

As regards the second issue, it is noted that under RR No.16-2012 (Tax Treatment of Sales, Barters, Exchanges or Other Dispositions of Shares of Publicly listed Companies Whose Ownership Levels Fall Below the Mandatory Minimum

Public Ownership (MPO) Level, Monitoring of these Compamies and their Stock Transactions. and Amending Revenue Regulations No. 60-08 for the Purpose, a publicly-listed company is required, at all times, to maintain a minimum percentage of listed securities held by the publicor public float of ten percent10% of its issued and outstanding shares, exclusive of any treasury shares,or at such percentage as may be prescribed by the Securities and Exchange Commission (SEC or PSE.As

considered in the determination of the MPO requirement because ownership of such opined by the PSE, however, only the company's listed common shares are

shares gives the public the right to participate in the election of members of the

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Company's Board of Directors, as well as participate in the Company's major corporate decisions through the exercise of voting rights. Pertinent portion of the PSE

letter is quoted below for reference:

"As our team advised in various discussions and correspondenceswiththeCompany'sSMC

representatives, while the Exchange s Listing Rules do not expressly provide a specific requirement that only

companies with listed common shares can list preferred

shares,the listing and availability for public ownership of common shares is a key characteristic of publicly held companies because ownership of such shares gives the

public the right to participate in the election of members of the Company's Board of Directors, as well as participate in the Company's major corporate decisions through the exercise of voting rights. Thus.for purposes of compliance with the Exchange's MPO requirement, only the listed company's common shares are considered. "

Thus, while a publicly-listed company is required to maintain MPO under RR No.16-2012. such requirement shall only apply to the company's listed common

shares. Accordingly, we hereby confirm your opinion that the applicability of the

provisions of RR No. 16-2012 is limited only to the sale and transfer of the listed common shares of publicly-listed companies through the Local Stock Exchange. In

participating. non-convertible to common shares. the MPO requirement is this case. considering that the shares are structured to be non-voting, cumulative, non-

inapplicable and the same does not fall within the purview of RR 16-2012.

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

Very truly yours,

KIM S.JACINTO-HENARES Commissioner of Internal Revenue

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