Taxes Due on the Transfer of Proprietary Membership Certificate

November 20, 1989 BIR RULING NO. 235-89 178 000-00 235-89 Gentlemen : This refers to your letter dated September 18, 1989 stating that you are a French foreign subsidiary duly registered with the Board of Investments and Securities and Exchange Commission as a domestic corporation; that you are being managed by a French expatriate; that you purchased a Proprietary Membership Certificate from the Manila Polo Club on November 29, 1984 at a cost of P130,000.00 for the use of your General Manager, Mr. Hugues de Tissot; that as per rules and regulations of the Manila Polo Club, the share of stock (certificate) was issued in the name of Mr. Hugues de Tissot, as registered owner, not your company; that in your books, the cost of P130,000.00 is recorded as an asset under the Investment account; that Mr. Hugues de Tissot is now leaving the country and is being reassigned in your head office; that in his place, Mr. Philippe Coupat, a new expatriate is appointed as General Manager; that in view of this change, you are requesting the transfer of the said share (certificate) from Mr. Hugues de Tissot to Mr. Philippe Coupat; and that no amount of money is involved in the transfer. Based on the foregoing representations, you now request a ruling on the taxes due on your aforesaid transfer of your Proprietary Membership Certificate in the Manila Polo Club from Mr. Hugues de Tissot, your former General Manager, to Mr. Philippe Coupat, your newly appointed General Manager. In reply, please be informed that since the transfer does not involve any consideration, the same is not a taxable transaction; hence, the transferor, Mr. Hugues de Tissot, is not subject to income tax. Moreover, while the above transaction is considered a gift since it is a valid transfer or property from one person to another without consideration or compensation therefor, the same is not subject to the gift tax. This is so because although there is a direct gift, there is no donative intent under the above circumstances in this case. It has been held that in a direct gift, the element of donative intent must be present in the transfer of property to be donated. (Perez vs. Commissioner, CTA Case No. 1707, Feb. 10, 1969) However, since the Proprietary Membership Certificate shows that the registered owner thereof shall be entitled to a pro-rata share of the assets of the Club, the same is considered a certificate showing interest in the property of a corporation. Accordingly, the transfer of said Certificate is subject to the documentary stamp tax of P0.20 on each P200.00 or fractional part thereof, of the face value of such certificate, in accordance with Section 178 of the Tax Code. cd Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner