Land Bank of the Philippines

February 21, 2024 BIR RULING NO. OT-008-2024 Secs. 24 (C), 175 & 176, Tax Code, as amended; BIR Ruling No. OT-014-2023 Land Bank of the Philippines Landbank Plaza, 1598 M.H. Del Pilar corner Dr. J. Quintos Sts., Malate, Manila Attention: Atty. Cherry Martinez-Romano Head, Banking Legal Services Department Gentlemen : This refers to your request on behalf of Landbank of the Philippines (LBP) for confirmation that the transfer of the membership share in the Manila Polo Club, Inc. ("MPC") from the former nominee, AAA (AAA) to the new nominee, BBB (BBB) is not subject to capital gains tax (CGT) and documentary stamp tax (DST). TIADCc Background 1. LBP is the true and beneficial owner of member share in the MPC, represented by Proprietary Membership Certificate (PMC) No. 6639. It is among the assets in the books of the Company. 2. Because the Articles of Incorporation and By-laws of MPC provide that only natural persons shall be admitted as proprietary members, LBP registers its MPC proprietary member share under the name of an officer of LBP in order that he/she may use the facilities and avail of the privileges of MPC. When such officer concludes his/her assignment or employment, LBP designates another officer to be the new holder of its MPC proprietary member share. 3. With the conclusion of the employment of AAA with LBP, LBP designated BBB as its authorized transferee of PMC No. 6639. n The Transfer is not subject to DST. The transfer is not subject to DST under Section 175 of the Tax Code, as amended. The rule in this jurisdiction is that the assignment of shares of stock of a domestic corporation is subject to DST upon execution of the deed transferring ownership or rights thereto, or upon delivery, assignment or indorsement of such shares in favor of another. cSEDTC Revenue Regulations (RR) No. 13-2004, implementing the provisions of Republic Act (RA) No. 9243, otherwise known as "An Act Rationalizing Further the Structure and Administration of the Documentary Stamp Tax" qualified this rule by stating that for a sale or exchange to be taxable, there must be an actual or constructive transfer of beneficial ownership of the shares of stock from one person to another. Section 4 thereof provides: "For a sale or exchange to be taxable, there must be an actual or constructive transfer of beneficial ownership of the shares of stock from one person to another. Such transfer may be manifested by the clear exercise of attributes of ownership over such stocks by the transferee, or by an actual entry of a change in the name appearing in the certificate of stock or in the Stock and Transfer Book of the issuing corporation or by any entry indicating transfer of beneficial ownership in any form of registry including those of a duly authorized scripless registry, such as those maintained for or by the Philippine Stock Exchange. However, if by the transfer of certificates of stock from a resigned trustee to a newly appointed trustee such certificate of stock remain in the name of the cestui que trust or the resigned trustee so that the new trustee is constituted as mere depository of the stock, such transfer is not taxable. Provided, however, that transfer of shares to "nominees" to qualify them to sit in the board or to qualify them to perform any act in relation to the corporation shall not be subject to the DST provided herein only upon proof of a duly executed Nominee Agreement showing the purpose of the transfer; that the transfer is without consideration other than the undertaking of the nominee to only represent the beneficial owner of the stock; and the transfer is in trust." (Emphasis and underscoring supplied.) Therefore, the herein transfer cannot be subject to DST as there is no transfer or conveyance to the new Trustee-appointee of the beneficial ownership of any right, claim or interest over the MPC share or over the asset of MPC. There being no new conveyance to speak of in this case, there is no new exercise of a privilege upon which DST may be imposed. However, the notarial acknowledgment to the Deed of Declaration of Trust is subject to DST imposed under Section 185 of the Tax Code, as amended. It is, however, understood that this Ruling shall not serve as authority to the Corporate Secretary of LBP to effect the transfer of the MPC share in the name of the new Trustee-appointee without the necessary Tax Clearance (TCL) and/or Certificate Authorizing Registration (CAR) issued by this Bureau. In this regard, this Ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the TCL/CAR as prescribed in Revenue Memorandum Circular (RMC) No. 37-2012. AIDSTE This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) ROMEO D. LUMAGUI, JR. Commissioner of Internal Revenue n Note from the Publisher: The official copy of the issuance obtained by the publisher has a missing page. This will be updated as soon as the publisher is able to secure a copy.