October 24, 2007

BIR RULING [DA-565-07]

DA 326-05

Imperial Resources, Inc.

42-J, 4th Street, New Manila
Quezon City
Attention: Atty. Manolito S. Soller
Legal Counsel

Gentlemen :

This refers to your letter dated August 7, 2007 stating that Imperial
Resources, Inc. (Imperial) is a corporation whose securities are registered
under the Securities and Regulation Code and also listed in the Philippine
Stock Exchange; that it is currently and primarily engaged in the business of
operating coal mines, and of prospecting, exploration of mining, milling,
concentrating, converting, smelting, treating, refining, preparing for market,
manufacturing, buying, selling, exchanging, and otherwise producing, and
dealing in all kinds of ores, metals and minerals, asphalt-bithumen,
hydrocarbons, acids and chemicals, and in the products and by-products
thereof; that on December 16, 1999, at least a majority of the Board of
Directors of Imperial approved the amendment of its Capital Stock by
increasing its par value from P0.01 to P5.00 and at the same time decreasing
the number of shares at a ratio of five hundred (500) shares to one (1)
share, thereby maintaining the amount of authorized and outstanding capital
stock; that an amended articles of incorporation was prepared containing
the above resolution of the board and was ratified by the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock in a
meeting duly called for such purpose on May 25, 2000, conformably with
Section 16 of the Corporation Code of the Philippines; that such amended
articles of incorporation was likewise approved by the Securities and
Exchange Commission (SEC) on September 15, 2000; that as a result of the
increase in par value and a corresponding decrease in number of authorized
capital stock, it is now necessary to replace all the stock certificates now in
the hands of all stockholders with new ones so that the correct number of
shares held and the par value thereof shall be reflected therein; that in
replacing the stock certificates, there would be no transfer of ownership or
intention to transfer the same as they are just replacements thereof; and
that as of even date, there are more than a thousand stockholders of record
and all of them were issued the requisite stock certificates. TCDHIc

Based on the foregoing representations, you now request for

confirmation of your opinion that no gain or loss shall be recognized on the
replacement of stock certificates to reflect the correct number of shares and
par value thereof as a result of the amendment to the articles of
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 incorporation, neither is it subject to documentary stamp tax and donor's
tax.
In reply thereto, please be informed that in BIR Ruling No. 096-96
dated September 3, 1996, this Office had already occasioned to rule on the
matter, when it said that —
". . . since the transaction is without any monetary
consideration, and considering further that for the foregoing reasons,
there is actually no transfer of ownership of the share or even a
portion thereof, the issuance by the Corporate Secretary of the Club
of a replacement stock certificate in the name of its true owner, . . .,
is not subject to capital gains tax imposed under Section 21(d) of the
Tax Code, as amended. ESTDIA

Likewise, the replacement of Stock Certificate is not subject to

the documentary stamp tax imposed under Section 176 of the Tax
Code, as amended, but only to the documentary stamp tax of P15.00
pursuant to Section 188 of the said Code, as amended by Republic
Act No. 7660."
The same rule was reiterated in BIR Ruling No. DA216-04 dated April
21, 2004, which held that —
"In the instant case, the surrender of the certificates of stock by
the stockholders of ECPI is a necessary consequence of the decrease
in the capital stock of the said corporation. Thus, in order to reflect
the corrected number of shares therein, it is required that the
stockholders of record should transfer and surrender their old
certificates of stock to the corporation, without any monetary
consideration, but only for the purpose of replacing the old stock
certificates into new ones. In other words, there is no effective
transfer of beneficial ownership over the said shares. Such being the
case, the replacement of stock certificates is not subject to capital
gains tax imposed under Section 127(A) of the Tax Code of 1997 nor
to the documentary stamp tax prescribed in Section 176 of the Tax
Code." SDHAEC

Finally, the replacement of stock certificates is not subject to

gift tax since there is no intention to donate on the part of any of the
parties and the transaction is effected purely for business reasons."
Inasmuch as the above-cited rulings are in all fours similar to the
instant case, this Office hereby confirms your opinion that no gain or loss
shall be recognized on the replacement of stock certificates to reflect the
correct number of shares and par value thereof as a result of the
amendment to the articles of incorporation nor is it subject to documentary
stamp tax prescribed in Section 176 of the Tax Code of 1997, as amended,
and donor's tax imposed under Section 99, supra.
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 null and void. ADETca

Very truly yours,

(SGD.) JAMES H. ROLDAN

CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 Assistant Commissioner
Legal Service

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