BIR Ruling No.

419-07
July 27, 2007

Facts:

Cargill Germany, a non-resident foreign corporation, wholly owns CFI Germany, another non-
resident foreign corporation. CFI Germany, on the other hand, owns 99.9% of CTSP Philippines,
a domestic corporation. Cargill Germany and CFI Germany entered into a merger agreement with
Cargill Germany as a surviving entity. As a consequence thereof, the shares of stock of CFI
Germany in CTSP Philippines shall be transferred to Cargill Germany.

Issue:

1) Whether or not the transfer of CTSP Philippines shares from CFI Germany to Cargill
Germany would be subject to the capital gains tax.
2) Whether or not the transfer of CTSP Philippines shares from CFI Germany to Cargill
Germany would be subject to the documentary stamp tax.

Ruling:

The transfer of the CTSP Philippines shares is a legal consequence of the merger between CFI
Germany and Cargill Germany, both non-resident foreign corporations. The merger was
considered to have taken place outside the Philippines thereby not subject to the capital gains tax
under Section 28(B)(5)(c) of the Tax Code. The BIR cited BIR Ruling DA-209-05 dated April 27,
2005 where it was decided that no taxable transaction took place in the Philippines as the transfer
of shares involved two non-resident foreign corporations and that the applicable law is that of
Taiwan and not the Philippines.

Moreover, due to the fact that the merger took place abroad, the transfer of shares shall also not
be subject to the documentary stamp tax.