BIR Ruling [UN-258-95]

July 11, 1995 BIR RULING [UN-258-95] Romulo, Mabanta, Buenaventura Sayoc & De Los Angeles 4/F, King's Court I 2129 Chino Roces Avenue Makati, Metro Manila Attention: Atty . Jacqueline Romero-Laurel Gentlemen : This refers to your letters dated June 9 and 10, 1994 requesting, in behalf of your client, Mr. Joseph W. Cordero, for confirmation of your opinion that the transfer by your said client of shares of stock of Sunward Technologies Philippines, Inc. (Sunward) issued in his name to the beneficial owners thereof or to their other trustees is exempt from both the capital gains tax and the documentary stamp tax. cdtech It is represented that Sunward is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) on December 22, 1987; that 9,970 Sunward shares of stock were issued in the name of the said Mr. Cordero, for which Stock Certificate No. 002 was issued on July 13, 1989; that a Declaration of Trust was executed by Mr. Cordero to the effect that the said shares of stock were held in trust by him for the beneficial owners of the shares, Sunward, USA, a corporation organized and existing under the laws of the State of California, USA; that you are of the opinion that in the event that Mr. Cordero, a trustee of the said shares of stock, will convey them to the beneficial owners or their duly appointed trustees, no liability to capital gains tax will arise because there is no actual transfer of ownership of the shares and there is no valuable consideration involved; that the said trustee need not file a capital gains tax return for the said transaction; and that you are likewise of the opinion that the above described transaction is exempt from the documentary stamp tax pursuant to Section 191 of Regulations No. 26. In reply, please be informed that under Section 21(d) of the Tax Code, as amended, capital gains realized from the sale, exchange or disposition of shares of stock in any domestic corporation shall be taxed as follows: (1) Net capital gains tax as defined in Section 33(a)(2) of the Tax code, as amended, realized during each taxable year from the sale, exchange or other disposition of shares of stock not traded through a local stock exchange: Not over P100,000.00 10% Over P100,000.00 20% Such being the case, and considering that in the event Mr. Cordero, as trustee of the said shares of stock, conveys the same in favor of the beneficial owners or their duly appointed trustees there would be no actual transfer of ownership over the aforementioned shares of stock as a result thereof, coupled with the fact that the conveyance is without any valuable consideration, this Office is hereby confirming your opinion that the said transaction is not subject to the capital gains tax imposed under Section 21(d) of the Tax Code, as amended. Moreover, your opinion that the deed conveying the aforesaid shares of stocks in favor of the beneficial owners or their duly appointed trustees is not subject to documentary stamp tax pursuant to Section 191 of Regulations No. 26, otherwise known as The Documentary Stamp Tax Regulations, is likewise, hereby confirmed. However, the notarial acknowledgment is subject to the documentary stamp tax of P10.00 under Sec. 188 of the Tax Code, as amended by R.A. 7660. (BIR Ruling No. 123-93) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cdta Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)