Sale of Shares of Stock in Cainta Development Corporation Not Subject to 10% Capital Gains Tax

January 19, 1982 BIR RULING NO. 011-82 034-g 102-81 011-82 Sycip, Gorres, Velayo & Co. P. O. Box 589, Manila 2800 Attention: Mr . C . C . Gison Tax Division Gentlemen : This refers to your letter dated August 25, 1981 requesting confirmation of your opinion that the gain derived by your client, the Glaxo Group, Limited, from the sale of its shares of stock in Cainta Development Corporation is not subject to the 10% capital gains tax. You are represented that your client, a U.K corporation which is primarily involved in the pharmaceutical business and which is not engaged in trade or business in the Philippines, held in legal and beneficial ownership 2,880 shares of the capital stock of Cainta Development Corporation, a domestic corporation duly registered and licensed to engage in the development of real estate in the Philippines; that your client sold these 2,880 shares to a Filipino citizen for P860, 851; and that before the repatriation of the proceeds of the sale could be undertaken, the Central Bank is requiring the payment of the 10% final tax prescribed under Section 34(g) of the Tax Code. In reply, I have the honor to quote Article 12, paragraph 4 of the RP-UK Tax Treaty. Capital gains from the alienation of any property other than those mentioned in paragraphs (1), (2) and (3) of this Article shall be taxable only in the Contracting State of which the alienator is a resident. It is clear from the aforequoted that the capital gains from the alienation of any property other than those mentioned in paragraphs 1, 2, and 3 of Article 12 of the treaty shall be taxable only in the State where the alienator is a resident. Inasmuch as the sale of shares of stock is not among those mentioned in said paragraphs 1, 2 and 3 of Article 12, the gains derived by your client which is a resident of the United Kingdom from the sale of its shares of stock in Cainta Development Corporation, are not subject to the 10% final capital gains tax imposed by Section 34(g) of the Tax Code, as amended by Presidential Decree No. 1739, but are subject to tax only in the United Kingdom. Very truly yours, RUBEN B. ANCHETA Acting Commissioner