UK Tax--Stock Transactions

May 19, 1981 BIR RULING NO. 083-81 24-b 000-00 083-81 Jalandoni, Jayme, Adams & Co., Inc. Room 1208, Ermita Centre Building 1350 Roxas Blvd., Ermita, Metro Manila Attention: Mr . Nilo M . de Villa Senior Vice-President Gentlemen : This refers to your letter dated January 16, 1981 requesting confirmation of your opinion to the effect that the capital gains derived by your clients, who are residents of the United Kingdom and with no permanent establishment in the Philippines, from sale or alienation of shares of stock of Philippine companies listed in the local stock exchange are subject to tax only in the United Kingdom. In reply thereto, I have the honor to inform you that Article 12 of the Convention between the Government of the Republic of the Philippines and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains provides, viz: " Article 12 Gains from the Alienation of Property "1. Capital gains from the alienation of immovable property, as defined in paragraph (2) of Article 6, may be taxed in the Contracting State in which such property is situated. "2. Capital gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing professional services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in the other State. "3. Notwithstanding the provisions of paragraph (2) of this Article, capital gains derived by a resident of a Contracting State from the alienation of ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships and aircraft shall be taxable only in that Contracting State. "4. 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. "5. The provisions of paragraph (4) of this Article shall not affect the right of a Contracting State to levy according to its own law on capital gains from the alienation of movable property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned Contracting State at any time during the six-years immediately preceding the alienation of the property." The foregoing stock transactions fall within the purview of paragraph 4 above-quoted. Accordingly, and considering that your clients are residents of the United Kingdom, the capital gains derived by them from sale or alienation of shares of stock of Philippine companies are subject to tax only in the United Kingdom. Very truly yours, RUBEN B. ANCHETA Acting Commissioner