BIR Ruling [DA-668-06]

November 15, 2006 BIR RULING [DA-668-06] Mr. Ernesto R. Maalat, C.P.A . Virgen SG Barangay Building 3/F, Rms. 325 & 326, Lacson cor. 6th Street Bacolod City S i r : This refers to your letter dated November 8, 2006 requesting in effect for a ruling on the tax consequence of the sale of shares of stock of a domestic corporation. It is represented that Juan L. Jalandoni owns 90% of the shares of stock of Jalsor Real Estate Development Corporation, a duly registered corporation with the Securities and Exchange Commission; and that he intends to sell his interest therein consisting of 224,000 shares, at par value, to other stockholders. In reply, please be informed that Section 24(C) of the Tax Code of 1997, as amended, provides as follows: "SEC. 24. Income Tax Rates . xxx xxx xxx (C) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange . The provisions of Section 39(B) notwithstanding, a final tax at the rates prescribed below is hereby imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange . Not over P100,000 5% On any amount in excess of P100,000 10%" (Emphasis supplied) Accordingly, since the shares of stock owned by Juan L. Jalandoni will be sold directly to the other stockholders and not through the stock exchange, the net capital gains realized therefrom, if any, shall be subject to the capital gains tax above imposed. TcaAID Moreover, the sale of the aforementioned shares of stock shall be subject to the documentary stamp tax imposed under Section 175 of the same Code, at the rate of Seventy-five centavos (P0.75) on each Two hundred pesos (P200), or fractional part thereof, of the par value of such stock. 1 Please be guided accordingly. (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service Footnotes 1. (Amendment under Sec. 3, R.A. 9243).