August 3, 2012

BIR RULING NO. 508-12

Sec. 40 (C) (2); 00-000

DeGuzman Celis & Dionisio Law Offices

Attention: Attys. Mariano L. Celis II

Gentlemen :

This refers to your letter dated December 3, 2010 stating that Nutri-Asia Inc.
(doing business under the name and style of UFC Philippines, hereinafter referred to as
"NAI") is a corporation duly registered with the Securities and Exchange Commission
(SEC) under SEC Registration No. A1996-2319 with TIN 410-004-627-848; that it has
an authorized capital stock of One Hundred Million Pesos (P100,000,000.00) divided
into Ten Million (10,000,000) shares with a par value of Ten Pesos (P 10.00) per share;
that the total capital stock issued and outstanding of NAI amounts to Sixty Three
Million Pesos (P63,000,000.00); that on the other hand, NA Prime Resources
Corporation (NA Prime) is a domestic corporation duly registered with the SEC under
SEC Registration No. A200010829 with TIN 207-013-254; that 100% of the outstanding
capital stock of which is owned by NAI; that it has an authorized capital stock of Four
Million Pesos (P4,000,000.00) divided into Forty Thousand (40,000) shares with a par
value of One Hundred Pesos (P100.00) per share, 10,000 of which have been issued
and outstanding; that the respective Board of Directors of NAI and NA Prime have
effected a merger with NAI, as the surviving corporation, and the stockholders of the
said corporations approved such merger, for the following business purposes:
(a) The integration of the administrative facilities of the constituent
corporations will result in economies of scale and ef ciency of
operations;
(b) The consolidation of the assets of the constituent corporations will
allow the procurement and nancing and credit facilities under more
favourable terms; and
(c) The merger will make possible the more productive use of the properties
of the constituent corporations.
that the SEC had approved the Plan and Agreement of Merger and Articles of Merger,
wherein NA Prime is merged into NAI, the surviving corporation; that NAI will not issue
any shares of stock in consideration of the merger, considering that NA Prime is a
wholly-owned subsidiary of NAI; that all the outstanding shares of NA Prime shall be
deemed cancelled; that as NAI is the surviving corporation, NA Prime shall cease to
exist and its legal personality is considered terminated; that upon the effective date of
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 the merger, NAI is deemed to have acquired all the assets and assumed all the liabilities
of NA Prime; that these assets were transferred at the net asset value as determined
on the basis of NA Prime's audited nancial statements as of June 30, 2010; that NAI
shall become the owner of all the rights, assets, privileges and other properties of NA
Prime and assumed all the debts and liabilities of the latter in the same manner as
though NAI itself incurred such liabilities and obligations and any claim, action or
proceeding against NA Prime shall be prosecuted by or against NAI; and that however,
NAI may avail of all the defences, rights, privileges, set-offs and counterclaims which
NA Prime may have under the premises. CADacT

Based on the foregoing representations, you now request con rmation of your
opinion that —
1. The described merger of NA Prime into NAI is a tax-free merger under
Section 40 (C) (2) of the Tax Code of 1997;
2. The transfer of assets by NA Prime to NAI pursuant to the merger is not
subject to value-added tax (VAT) and any unused input tax of NA
Prime, as of the effective date of the merger will be absorbed by NAI
as the surviving corporation;
3. The transfer of assets of NA Prime, pursuant to the merger, is likewise not
subject to donor's tax because there is no intention to donate on the
part of the entities involved;
4. In the same manner, the transfer of assets of NA Prime is not subject to
documentary stamp tax (DST) under Section 199 (m) of the Tax Code
of 1997, as amended by Republic Act (RA) No. 9243;
5. Likewise, the excess Creditable Withholding Tax (CWT) of NA Prime, as
the absorbed corporation in a statutory merger, are transferred to and
vested in NAI, as the surviving corporation, and may be utilized by the
latter; and
6. Since the merger involves the parent company and its wholly-owned
subsidiary, there will be no new shares issued, hence DST on original
issuance of shares of stock will not apply.
In reply thereto, please be informed that after a careful review of the above
corporate re-organization, the intended re-organization is an upstream merger between
a parent company (NAI) and its subsidiary (NA Prime), where the former will not be
issuing any shares to NA Prime, in exchange for the assets to be transferred by NA
Prime to NAI as a result of the merger. In effect, the said transfer partakes of the nature
of a donation made by a subsidiary to its parent company, 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 NA Prime
without payment of the corresponding taxes. aEIADT

Accordingly, this Of ce holds that your request is hereby DENIED for being
devoid of legal basis.
This ruling hereby REVOKES all previously issued rulings under the same set of
facts and circumstances which are inconsistent herewith.

Very truly yours,

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