BIR Ruling [DA-280-96]

July 30, 1996 BIR RULING [DA-280-96] Joaquin Cunanan & Co. 8th Floor, BA-Lepanto Building, 8747 Paseo de Roxas, Makati City Attention: Mr . George J . Lavadia Principal Gentlemen : This refers to your letter dated September 25, 1995 requesting for a confirmation of your opinion that the transfer to your client's name, Marcopper Mining Corporation, of the proprietary membership shares in certain Sports Club which it actually owns but are registered in the name of its Managers is not subject to income tax nor to the donor's tax. It is represented that your client, Marcopper Mining Corporation, is a corporation duly organized and existing under the laws of the Republic of the Philippines; that your client had purchased membership shares from different sports club namely. Canlubang Golf and Country Club, Inc., Baguio Country Club Corporation and the Metropolitan Club, Inc.; that although these shares are booked as part of your client's assets, they were registered under the name of its managers (who are assigned not more than one membership share each); that your client now wishes to transfer the above shares permanently to the name of the company without any consideration given to the managers, to avoid the necessity of transferring the membership shares to a new manager each time that a member/manager retires or resigns from the company. In reply, please be informed that since the said transfer do not involve any consideration, the transferors are not subject to income tax. This is so because although there is a direct gift, there is no donative intent on the part of the transferors. It has been held that in a direct gift, the element of donative intent must be present in the transfer of the property to be donated. (Perez vs. Commissioner, CTA Case No. 1707, Feb. 10, 1969) However, since the Proprietary Membership Certificate shows that the registered owner thereof shall be entitled to a pro-rata share of the assets of the Club, the same is considered a certificate showing interest in the property of a corporation. Accordingly, the transfer of said certificate is subject to the documentary stamp tax of fifty centavos (P0.50) on each two hundred pesos (P200.00) or fractional part thereof, of the face value of such certificate, in accordance with Section 178 of the Tax Code, as amended by R.A. No. 7660 and implemented by Revenue Regulations 9-94. (BIR Ruling No. 235-89 dated November 20, 1969) cdi Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service