Sale of Intangible Personal Property Owned by a Non-Resident Alien

March 7, 1960 BIR RULING NO. 124-60 Mr. Lope M. Japlit Zamboanga City S i r : This is in reply to your letter dated January 28, 1960, containing the following query: "X, a non-resident alien, residing in United States owns shares of stock of Y, a P.I. domestic corporation. X sold her shares of stock to A, a resident of the Philippines. The deed of sale was made in United States, the payment of the value of the shares was made in United States. In other words, the transfer of ownership was made in United States. A, the buyer, has a representative in United States who made all those transaction in behalf of A." As a general rule, income derived from the purchase and sale of personal property shall be treated as derived entirely from the country in which it is sold, that is, the place where the personal property is marketed. Hence, for income tax purposes, the proceeds derived from the sale of shares of stock which is an intangible personal property shall be considered taxable income to the vendor in the place where the sale is perfected and consummated. A contract of sale is perfected at the moment there is a meeting of minds upon the price. (Art. 1475, New Civil Code). Likewise, a contract of sale is considered consummated upon delivery, actual or constructive, of the object of the said contract. In other words, "when and where property in the goods passes, when and where the incidents of ownership vest in the vendee." The sale of intangible personal property like shares of stock owned by a non-resident alien, if perfected and consummated abroad is not taxable in the Philippines. Under the circumstances mentioned in the afore-quoted query, the income derived by X from his sale to A of his (X) shares of stock in Y corporation, the sale having been perfected and consummated abroad, is not taxable income in the Philippines. In this connection, you are further informed that BIR RULING dated February 7, 1952 still stands, the same having gained another affirmation and application in the recent decision of the Honorable Supreme Court in the case of the "Collector of Internal Revenue vs. Anglo California National Bank", G.R. No. L-12476, promulgated January 29, 1960. aisadc Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue