February 13, 2008

BIR RULING [DA-087-08]

Fortun Narvasa Salazar Law Offices

23/F, Multinational Bancorporation Centre
6805 Ayala Avenue, Makati City

Attention: Attys. Dickson B. Berberabe &

Charisse C. Corales

Gentlemen :

This refers to your letters dated October 2, 2006 and August 21, 2007
requesting confirmation of your opinion that Asian Development Bank (ADB) is an
international organization exempt from any and all taxes imposed by the Philippine
government and its political subdivisions, such that, as a purchaser of movable
properties (consisting of machinery and equipment), which properties were
subsequently transferred to another purchaser, the tax declarations over said property
need not be transferred to ADB, but instead, may be transferred directly from ADB's
seller to ADB's purchaser.

It is represented that Primo Oleochemicals, Inc. ("Primo") obtained several

loans from a group of entities ("the Lenders") in order to finance the construction and
operation of an oleochemical plant located in Barangay Osmeña, Municipality of Jose
Panganiban, Province of Camarines Norte. To secure the different loans obtained and
to be obtained by Primo from the Lenders, a Joint Mortgage Indenture (JMI) dated
July 5, 1994, among other documents, was executed by and among Primo and the
Lenders. Primo mortgaged, as security for the different loans it obtained, the
equipment and machinery of the oleochemical plant.

Primo failed to repay its loans to the Lenders that led to the institution of a
foreclosure proceeding over the machinery and equipment, among others. On March
31, 2003, the properties covered by the JMI were sold at a public auction. At said
auction sale, ADB purchased the subject machinery and equipment. However, from
the time of ADB's purchase until the time of its sale of the machinery and equipment,
ADB failed to secure the transfer of the tax declarations over the machinery and
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 equipment to its name. cITCAa

With the subsequent sale of the machinery and equipment to another purchaser,
the latter requested that the Provincial Treasurer of Camarines Norte transfer the tax
declarations over the machinery and equipment which are currently under the name of
Primo, directly to its name, without said tax declarations being transferred to ADB, on
the ground that there is no need to transfer the same to ADB's name considering that
ADB is tax-exempt. The Provincial Treasurer, however, refused to transfer said tax
declarations to ADB's purchaser on the ground that ADB should first pay the taxes
due on said machinery and equipment. Hence, this request for confirmation of the
tax-exempt status of ADB.

In reply, please be informed that transfer of tax declarations covering movable

properties, i.e., machinery and equipment, resulting from a sale transaction, does not
require the issuance of a Tax Clearance (TCL) or a Certificate Authorizing
Registration (CAR). As such, parties to the disposition of these movable properties
need not present proof of payment of internal revenue taxes, if there is any due on the
transaction, in order for the parties to transfer the tax declarations covering the same.

Thus, in relation to your request, this Office does not see the need to confirm
the tax-exempt status of ADB for purposes of transferring the subject tax declarations
to the purchaser. For the said purpose, however, it is advised that you direct your
concern to the Bureau of Local Government Finance (BLGF) which has jurisdiction
over matters relative to the taxability of transfers of tax declarations. Said office is in
a better position to render an opinion on issues involving local taxation.

Please be guided accordingly. CAacTH

(SGD.) JAMES H. ROLDAN

Assistant Commissioner
Legal Service
Bureau of Internal Revenue

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