Applicable Tax on Sale Abroad of Shares of Stock of Domestic Corporations Not Listed in Any Stock Exchange or Any Accredited Foreign Currency Board Clarified

July 24, 1980 BIR RULING NO. 109-80 Management of External Debt and Investment Accounts Department Central Bank of the Philippines M a n i l a Attention: A . Z . Tiangco Director Gentlemen : This refers to your letter dated March 10, 1980 requesting clarification as to the applicable tax on the sale abroad of shares of stock of a domestic corporation not listed in any stock exchange or any accredited foreign currency board between two (2) foreign investors, the transaction occurring after November 5, 1970 but before June 11, 1978, the date of effectivity of P.D. No. 1457. In reply, please be informed that, under the foregoing facts, the gain was derived from sources without the Philippines. It is only upon the effectivity of P.D. No. 1457 amending Section 37(e) of the Tax Code, that gains from the sale of stocks of domestic corporation are considered as income sources within the Philippines, regardless of the place of sale. Accordingly, and since foreign investors are subject to income tax only on income derived from sources within the Philippines, (Secs. 22(b) & 24(b), NIRC) the gain realized from the aforesaid transaction is not subject to the capital gains tax. Even if the stocks were acquired by the foreign investors on or after November 5, 1970, the sale thereof is not subject to the stock transaction tax imposed by Section 210(a) of the Tax Code, the same having been effected beyond the taxing jurisdiction of the Philippines. cdti Very truly yours, RUBEN B. ANCHETA Acting Commissioner