BIR Ruling [DA-013-97]

January 10, 1997 BIR RULING [DA-013-97] Belo Gozon Elma Parelasuncion & Lucila 15th Floor, Sagittarius Condominium H.V. dela Costa St., Salcedo Village Makati City Attention: Atty . Catherina M . Fernandez Gentlemen : This refers to your letter dated October 15, 1996 stating that your client, Malayan Bank Savings and Mortgage Bank (Bank) is duly licensed by the Bangko Sentral ng Pilipinas (BSP) to operate a savings and mortgage bank; that FLG Management and Development Corporations (FLG) is the owner of 450,000 shares in the Bank with a par value of P100.00 per share; that for expediency and to facilitate the processing of the bank's application for a license with the BSP, the 450,000 Bank shares were subscribed and registered in the name of Atty. Felipe L. Gozon (Nominee), who is a majority stockholder of FLG; that of the total subscription of P45,000,000.00 the amount of P28,599,000.00 has already been paid; that on November 24, 1995, the Nominee executed a Declaration of Trust whereby he declared and acknowledge the absolute title and ownership of FLG over the 499,999 shares of the Bank, retaining one (1) share in the name of the Nominee; and that the nominee agreed to execute the necessary instrument to enable FLG to register in its name legal title to the 499,999 Bank shares in the books of the Bank. aisadc Based on the foregoing, you now request a confirmation of your opinion that: 1. The execution of the transfer of the Bank shares from Atty. Felipe L. Gozon to FLG is likewise not subject to capital gains tax, donor's tax and documentary stamp tax. 2. The subsequent transfer of the Bank shares from Atty. Felipe L. Gozon to FLG is likewise not subject to capital gains tax, donor's tax and documentary stamp tax. In reply thereto, I have the honor to inform you that execution of a Declaration of Trust whereby a nominee shareholder acknowledges and states that he is holding certain shares in trust for the real owner, is not a taxable transaction/event. Further, the subsequent transfer by the Nominee to FLG of the 499,999 Bank shares without consideration will not involve any actual sale or conveyance of ownership since what is being transferred is merely legal title to the shares. Such being the case, the transfer by the Nominee to FLG, the true, actual, and beneficial owner of the aforementioned shares, is not subject to the capital gains tax under Section 21(d) or Section 124-A both of the Tax Code, as amended. Furthermore, the transfer is not subject to donor's tax since it pertains to the transfer by trustee/Nominee to the real owner, the FLG. Considering the foregoing, your opinion that the execution of a Declaration of Trust by Atty. Felipe L. Gozon in favor of FLG, over the 499,999 shares of stock in Malayan Savings Bank and Mortgage Bank as well as the subsequent transfer of the same by Atty. Felipe L. Gozon to FLG is not subject to capital gains tax, donor's tax documentary stamp tax is hereby confirmed. cdtech This ruling is being issued on the basis of the 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. (BIR Ruling No. 029-90 dated March 15, 1990; BIR Ruling No. 123-93 dated April 5, 1993; BIR Ruling No. UN-072-95 dated February 6, 1995) Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)