Application of Capital Gains Tax on Gains Derived from Sale of Shares of Stock Owned by Residents of United Kingdom and Ireland

July 1, 1981 BIR RULING NO. 102-81 034-g 083-81 102-81 Bello Abiera San Jose Pagunsan & Guinto 6th Floor, Cibeles Building 6780 Ayala Avenue, Makati Metro Manila Attention: Atty . Rafael D . Abiera Gentlemen : This refers to your letter dated January 30, 1981 in behalf of your client, the HongKong and Shanghai Banking Corporation (HSBC) requesting a ruling on the application of the capital gains tax with respect to the gains derived from the sale of shares of stock owned by residents of the United Kingdom and Ireland. It is represented that HSBC is in custody of certificates of shares of stock issued by local corporations owned by residents of the United Kingdom and Ireland but in the name of nominees of HSBC. cdti In reply, please be informed as follows: 1. Residents of the United Kingdom and Ireland are not subject to the capital gains tax imposed by Section 34(g) of the Tax Code, as amended by Presidential Decree No. 1739, on gains derived from the sales of shares of stock of local corporation owned by said residents in accordance with Section 4, Article 12 of the Philippine-United Kingdom Tax Treaty, which provides as follows: "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." In other words, said gains are subject to tax only in the United Kingdom. 2. The nominee shall be required to file the return but shall not be liable to pay the capital gains tax, if any, since the beneficial owners of the shares of stock are residents of the United Kingdom and Ireland and, therefore, subject to tax only in said countries. 3. The shares of stock owned by the residents of the United Kingdom and Ireland can be transferred in the books of the domestic corporation in the name of the buyer upon certification by this Office that the gains derived from the sale of said shares of stock are exempt from the capital gains tax imposed under Section 34(g) of the Tax Code as amended by Presidential Decree No. 1739. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner