BIR Ruling 614-12

November 9, 2012
BIR RULING NO. 614-12

Sec. 40 (C) (2); 00-000
Abacus Global Technovisions, Inc.
No. 28 N. Domingo Street near corner Gilmore St.
New Manila, Quezon City
Attention: Mr. Arturo V. Magtibay
President
Gentlemen :
This refers to your letter dated December 10, 2010 stating that Alpha Asia Hotels & Resorts, Inc.
(Alpha) is a domestic corporation duly registered with the Securities and Exchange Commission
(SEC) under SEC Registration No. 196943 with TIN 000-837-828; that it has an authorized capital
stock of Fifty Million Pesos (P50,000,000.00) divided into Fifty Million (50,000,000) shares at One
Peso (P1.00) par value of which the amount of Fifty Million Pesos (P50,000,000.00) has been fully
subscribed and paid; that Alpha's primary purpose is to acquire by purchase, lease, or otherwise
land, and interest in land, whether public or private ownership, and to erect thereon
hotels/hometels, and other buildings, structures and improvements; to own, lease, operate,
manage, and administer hotels/hometels, apartment hotels, inns, lodging houses, restaurants,
cafes, bars, refreshments rooms, shopping arcades, motor vehicles and all other facilities,
accommodations adjuncts and accessories appurtenants to a general hostelry business; that on
the other hand, Batangan Plaza, Inc. (Batangan) is likewise a corporation duly registered with the
SEC under SEC Registration No. AS096-004574 with TIN 005-121-909; that it has an authorized
capital stock of Eighty Million Pesos (P80,000,000.00) divided into Eighty Million (80,000,000)
shares at One Peso (P1.00) par value of which the amount of Fifty Million Five Hundred Thousand
Pesos (P50,500,000.00) has been subscribed and paid; that Batangan's primary purpose is to
own, acquire, operate, manage, develop, purchase, lease, sell, or otherwise dispose of land, and
interest in land for the purpose of erecting, managing, operating, selling, leasing, convention
centers, hotels/hometels, resort projects, apartelles, inns or other lodging houses, restaurants,
business centers and all other facilities, accommodations adjuncts and other accessories
appurtenants to a convention center project or a general hostelry and real estate business; that
Alpha and Batangan are 100% owned subsidiaries of Abacus Global Technovisions, Inc. (ABAGT);
that finally, ABAGT is a corporation registered with the SEC under SEC Registration No. AS09304711 with TIN 003-506-331; that it has an authorized capital stock of Five Hundred Million Pesos
(P500,000,000.00) divided into Five Hundred Million (500,000,000) shares at One Peso (P1.00)
par value of which the amount of Three Hundred Forty Million Pesos (P340,000,000.00) has been
subscribed and paid; that ABAGT's primary purpose is to own, develop, operate, and manage
hotels, condotels and other establishments that provide lodging, food, refreshments and allied
services to tourists, travellers and other transients with real estate as one of the secondary
purposes; that it is currently owned 57.87% by Blue Stock Development Holdings, Inc. (Blue
Stock); that the merger of Alpha, Batangan and ABAGT was approved by the SEC on May 27,
2010; that pursuant to the Articles of Plan of Merger, Alpha and Batangan will convey, assign and
transfer to ABAGT all their assets and liabilities existing as of December 31, 2009; and that the
Articles and Plan of Merger further provide that ABAGT being already the 100% owner of the
absorbed corporations prior to the merger, no new ABAGT shares shall be issued as a
consequence of the merger.
Based on the foregoing representations, you now request confirmation of your opinion that
1.
The above merger between Alpha, Batangan and ABAGT, with the latter as the surviving
corporation, is a statutory and tax free merger under Sections 40 (C) (2) and (6) (b) of the Tax
Code of 1997, as amended. Hence, no gain or loss shall be recognized on the transfer of assets
and liabilities of Alpha and Batangan to ABAGT;
2.
The transfer of assets and liabilities by Alpha and Batangan to ABAGT pursuant to the Plan
of Merger would not be considered as transfer of property for insufficient consideration subject to
donor's tax considering that there is no intention to donate on the part of the parties and
inasmuch as the transaction to be effected is purely for business reasons. Therefore, the said
transfer of assets by the absorbed corporations to the surviving corporation is not subject to
donor's tax;
3.
The transfer of the assets of the absorbed corporations pursuant to the merger is not
subject to value-added tax (VAT) as provided under Section 4.106-8 (b) (3) of Revenue
Regulations No. 16-2005. Moreover, any unused input tax belonging to the absorbed
corporations as of the effective date of the merger, if any, will be absorbed by the surviving
corporation in accordance with the same provision of law.
4.
The transfer of assets of Alpha and Batangan to ABAGT pursuant to the merger is not
subject to documentary stamp tax under Section 199 (m) of the NIRC as amended by RA No.
9243, otherwise known as An Act Rationalizing the Provisions on the Documentary Stamp Tax.
In reply thereto, please be informed that after a careful review of the above corporate reorganization, the intended re-organization is an upstream merger between a parent company,
Abacus Global Technovisions, Inc. (ABAGT), and its subsidiaries, Alpha Asia Hotels & Resorts, Inc.
and Batangan Plaza, Inc., where the former will not be issuing any shares in exchange for all the
assets to be transferred by its subsidiaries, as a result of the merger. In effect, the said transfer
partakes the nature of a donation made by the subsidiaries, Alpha Asia Hotels & Resorts, Inc. and
Batangan Plaza, Inc., to its parent company, ABAGT, contrary to what is contemplated in Section
40 (C) (2) of the Tax Code of 1997, as amended. In the same manner, the intended merger has
also the effect of dissolving and liquidating Alpha Asia Hotel & Resorts, Inc. and Batangan Plaza,
Inc. without payment of the corresponding taxes.
Accordingly, this Office holds that your request is hereby DENIED for being devoid of legal basis.
This REVOKES all previously issued rulings which are inconsistent herewith, under the same set
of facts and circumstances.
Very truly yours,
(SGD.) KIM S. JACINTO-HENARES
Commissioner
Bureau of Internal Revenue

BIR Ruling 614-12

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November 9, 2012

BIR RULING NO. 614-12

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