BIR Ruling [DA-311-05]

July 6, 2005 BIR RULING [DA-311-05] Seaboard Eastern Insurance Seaboard Centre, 103 Esteban Street Legaspi Village, Makati City Attention: Atty. Marilyn O. Ngo Gentlemen : This refers to your letter dated June 8, 2005 stating that your client, Lily M. Co, is the registered owner of 48,583 shares of stock of Seaboard Eastern Insurance Co.,Inc. with a par value of P100.00 per share; that these shares of stock are described in Stock Certificate No. 128; that on July 12, 2002, through a Deed of Donation, Lily M. Co transferred, conveyed and ceded her ownership over the 10,000 shares in favor of Jacqueline Halili M. Co at a book value of P191.00 per share or in an aggregate amount of P1,910,000.00; that the donor's tax in the amount of P116,800.00 had been paid to the Revenue District Office No. 47-East Makati; and that on May 25, 2005, Revenue Officer 11, Ms. Cecilia A. Francisco, through a letter to Lily M. Co demanded that the amount of P15,624.95 should be paid for the documentary stamp tax due on the donated shares with the corresponding 25% surcharge, interest and penalties, despite payment of the aforesaid donor's tax. In connection therewith, you now request for an opinion as to whether or not the transfer of shares of stock by virtue of a Deed of Donation is still subject to the documentary stamp tax prescribed in Section 176 of the Tax Code of 1997, as amended by Republic Act No. 9243, as implemented by Revenue Regulations No. 13-2004. In reply thereto, please be informed that Section 3 of R.A. No. 9243, as implemented by Revenue Regulations No. 13-2004, provides, to wit: "Sec. 175. Stamp tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or Certificates of Stock . On all sales, or agreements to sell, or memoranda of sales, or deliveries, or transfer of shares or certificates of stock in any association, company, or corporation, or transfer of such securities by assignment in blank, or by delivery, or by any paper or agreement, or memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the benefit of such stock, or to secure the future payment of money, or for the future transfer of any stock, there shall be collected a documentary stamp tax of Seventy-five centavos (P0.75) on each Two hundred pesos (P200),or fractional part thereof, of the par value of such stock: ...." A careful perusal of the above-cited section disclosed that the documentary stamp tax shall be imposed on the sales, agreements to sell, memoranda of sales, deliveries or transfer of shares or certificates of stock, meaning there must be a consideration and an actual or constructive transfer of beneficial ownership of the aforesaid shares from one person to another. However, in the instant case, although there is a transfer of beneficial ownership over the 10,000 shares of stock in Seaboard Eastern Insurance from Lily M. Co to Jacqueline Halili M. Co the said transfer is without consideration, it is not within the contemplation of the aforesaid section of R.A. No. 9243. Thus, in BIR Ruling No. DA106-03 dated April 3, 2003 ,this Office ruled that ". . . the additional imposition of the documentary stamp tax in the amount of P19,120.43, considering that there was no sale or transfer for a consideration of certificates of stock involved in the instant case, Section 176 of the same Tax Code, shall not apply." SUCH BEING THE CASE, this Office holds that the transfer of the 10,000 shares of stock, in Seaboard Eastern Insurance, from Lily M. Co to Jacqueline Halili M. Co by virtue of a Deed of Donation is not subject to the documentary stamp tax prescribed in Section 176 of the Tax Code of 1997, as amended by R.A. No. 9243, as implemented by Revenue Regulations No. 13-2004. IDTSaC 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 null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group