BIR Ruling [DA-105-99]

February 10, 1999 BIR RULING [DA-105-99] Fernandez, Santos & Lopez 12th Floor, L V Locsin Building 6752 Ayala cor Makati Avenues 1226 Makati City Attention: Mr . Carlos G . Zulueta Tax Director Gentlemen : This refers to your letter dated September 2, 1998 requesting on behalf of your client, Maersk-Filipinas, Inc . (Maersk) , for a ruling that the transfer of the Proprietary Membership Certificate to Maersk is not subject to capital gains tax. It is represented that Maersk holds one (1) share of Manila Polo Club, Incorporated (Manila Polo) represented by Proprietary Membership Certificate No. 4342 which is being held in trust by its former president, Mr. Birger Jurgensen; that the proprietary membership share was acquired by Maersk Line since year 1990 and had previously undergone numerous transfers from former Maersk presidents, including, Mr. Waldemar Poulsen to Mr. Niels T. Hansen (1990) and from Mr. Niels T. Hansen to Mr. Birger Jurgensen (1993); that due to the severance of employment of Mr. Birger Jurgensen with Maersk and his subsequent re-assignment abroad, Maersk had to assign the proprietary membership share to its present president, Mr. Kent S. Hagbarth; that Mr. Jurgensen executed a Special Power of Attorney in favor of, and to authorize, Mr. Hagbarth, among other things, "to act for and in (his) behalf in relation to (his) proprietary membership share in the Manila Polo Club"; that the transfer from Mr. Jurgensen to Mr. Hagbarth of the proprietary membership share will be without consideration since the transaction will involve only the transfer of the legal title, and the beneficial ownership of the proprietary membership share will remain with and still belongs to Maersk. prcd In reply, please be informed that since the transfer of the Proprietary Membership Certificate representing one (1) share of Manila Polo Club, Incorporated beneficially owned by Maersk, from its present nominee, Mr. Birger Jurgensen to a new nominee, Mr. Kent S. Hagbarth does not involve any monetary consideration or other material consideration the same is not a taxable transaction, therefore, no capital gains tax is due and payable on the aforementioned transaction. Moreover, while the said transaction is considered a gift since it is a valid transfer of property from one person to another without consideration or compensation therefor, the same is not subject to the gift tax. This is so because although there is a direct gift, there is no donative intent under the above circumstances. It has been held that in a direct gift, the element of donative intent must be present in the transfer of property to be donated. (Perez vs. Commissioner, CTA Case No. 1707, Feb. 10, 1989) [BIR Ruling No. 152-90 dated August 16, 1990] However, since the Proprietary Membership Certificate falls within the purview of the term "shares of stock", i.e. shares of stock in a recreation or amusement club (such as golf, polo, or similar clubs), the same is treated as a shares of stock. Accordingly, the transfer of said certificate is subject to the documentary stamp tax of One peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional part thereof, of the par value of such certificate, in accordance with Section 176 of the Tax Code of 1997. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)