BIR Ruling [UN-008-95]

January 4, 1995 BIR RULING [UN-008-95] Terocel Realty, Inc. 1313 M. Adriatico cor. Padre Faura Sts. Ermita Manila Attention: Mr . Benito Legarda Treasurer Gentlemen : This refers to your letter dated December 3, 1994 stating that you have declared property dividends consisting of 950,000 fully paid shares of stock of Ayala Corporation with a par value of P1.00 per share to your stockholders of record as of November 7, 1994; that the Ayala Corporation shares of stock to be distributed as property dividends has a carrying cost of P178,632.33 which forms part of your retained earnings; and that said property dividends shall be paid to your stockholders on or before December 15, 1994. cdtech In connection therewith, you are requesting for a certification authorizing the transfer of the property dividends consisting of the Ayala Corporation shares to the recipient stockholders without the payment of the capital gains tax. In reply thereto, please be informed that under Section 21 (c) (2) of the Tax Code, as amended, dividends received by individual stockholders from a domestic corporation and the share of an individual partner in a partnership subject to tax under Section 24(a) of the Tax Code, as amended shall be taxed at the rate of 15% in 1986; 10% effective January 1, 1987; 5% effective January 1, 1988; and 0% effective January 1, 1989. Such being the case, and since you declared property dividend consisting of 950,000 Ayala Corporation fully paid shares of stock to your individual stockholders of record as of November 7, 1994, said property dividend is not subject to income tax. Moreover, you are not subject to income tax or capital gains tax as a result of your declaration and subsequent transfer of your Ayala Corporation shares of stock as property dividends in favor of your stockholders. The Revenue District Officer concerned may now issue the necessary clearance to effect the transfer of the property dividends consisting of 950,000 fully paid Ayala Corporation shares of stock in the name of the recipient-stockholders. (BIR Ruling No. 010-89 dated February 1, 1989) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)