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    Bir Ruling No. 039-97

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    MysajadeJaoMejica
    The Bureau of Internal Revenue (BIR) ruled that the transfer of legal title to outstanding shares of stock from stockholders to the Philippine Central Depository, Inc.'s (PCD) nominee, PCD Nominee Corp., and vice versa, without a transfer of beneficial title, is not subject to capital gains tax, stock transaction tax, or documentary stamp tax. The BIR confirmed that conveying legal title to a trustee or nominee without consideration does not involve an actual transfer of ownership. However, transfers of beneficial ownership would be subject to applicable taxes.

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    Bir Ruling No. 039-97

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    MysajadeJaoMejica
    105 views3 pages
    The Bureau of Internal Revenue (BIR) ruled that the transfer of legal title to outstanding shares of stock from stockholders to the Philippine Central Depository, Inc.'s (PCD) nominee, PCD Nominee Corp., and vice versa, without a transfer of beneficial title, is not subject to capital gains tax, stock transaction tax, or documentary stamp tax. The BIR confirmed that conveying legal title to a trustee or nominee without consideration does not involve an actual transfer of ownership. However, transfers of beneficial ownership would be subject to applicable taxes.

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    The Bureau of Internal Revenue (BIR) ruled that the transfer of legal title to outstanding shares of stock from stockholders to the Philippine Central Depository, Inc.'s (PCD) nominee, PCD Nominee Corp., and vice versa, without a transfer of beneficial title, is not subject to capital gains tax, stock transaction tax, or documentary stamp tax. The BIR confirmed that conveying legal title to a trustee or nominee without consideration does not involve an actual transfer of ownership. However, transfers of beneficial ownership would be subject to applicable taxes.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    105 views3 pages

    Bir Ruling No. 039-97

    Uploaded by

    MysajadeJaoMejica
    The Bureau of Internal Revenue (BIR) ruled that the transfer of legal title to outstanding shares of stock from stockholders to the Philippine Central Depository, Inc.'s (PCD) nominee, PCD Nominee Corp., and vice versa, without a transfer of beneficial title, is not subject to capital gains tax, stock transaction tax, or documentary stamp tax. The BIR confirmed that conveying legal title to a trustee or nominee without consideration does not involve an actual transfer of ownership. However, transfers of beneficial ownership would be subject to applicable taxes.

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    © All Rights Reserved
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    of 3

    April 3, 1997

    BIR RULING NO. 039-97

    21 (d) 24 (e) (2) 000-00 039-97

    Romulo, Mabanta, Buenaventura


    Sayoc & De Los Angeles
    30/F Citibank Tower
    Paseo de Roxas, Makati City
    Attention: Edmundo P. Guevarra
    and
    Priscilla B. Valer

    Gentlemen :

    This refers to your letter dated February 20, 1997 requesting, in


    behalf of your client, the Philippine Central Depository, Inc. ("PCD"), for
    confirmation of your opinion that the transfer of legal title to outstanding
    shares of stock, without a transfer of beneficial title, from stockholders to
    the PCD Nominee Corp., as nominee, and vice-versa, is not subject to the
    capital gains tax imposed under Sections 21 (d), 22(a) (3), 24(e) (2) and 25(a)
    (6) (C) of the Tax Code or the stock transaction tax imposed under Section
    124-A of the Tax Code and the documentary stamp tax imposed under
    Section 176 of the Tax Code.
    It is represented that PCD is an entity licensed by the Securities and
    Exchange Commission ("SEC") as a depository of, among others,
    shares of stock listed and traded in the Philippine Stock Exchange ("PSE");
    that its primary mandate is, among others, to introduce a scripless book-entry
    system for the settlement of PSE trades, in order to address the
    problem of delay, inefficiency and even fraud attending the existing paper-
    based settlement procedure; that for PCD to carry out this mandate, the
    shares of stock of the PSE-listed companies must first be "lodged" into
    the PCD System for "immobilization"; that lodgment is the process by which
    stockholders of the PSE-listed company transfer the legal title over their
    shares of stock in favor of PCD Nominee Corp. ("PCD Nominee"), a
    corporation wholly owned by PCD whose sole purpose is to act
    as nominee and legal title holder of all shares of stock lodged
    into PCD (beneficial title to the "lodged" shares remains with the lodging
    stockholders); that immobilization is the process by which the share
    certificates of lodging stockholders are cancelled by the Transfer Agent and a
    new stock certificate covering all the shares lodged ("Jumbo Certificate")
    issued in the name of PCD Nominee, in order that settlement of PSE
    trades of the PSE-listed company can be effected by mere book-entry
    transfer of beneficial title in the PCD System without the transfer of stock
    certificates covering the traded shares; and that no consideration is paid for
    the transfer of legal title to PCD Nominee.
    The Corporation Code requires that all shares of stock of a corporation
    must be evidenced by a certificate and a stockholder who has fully paid his
    subscription has the right to demand such certificate. Thus, it is also
    represented that if a stockholder wishes to withdraw his stockholdings from
    the PCD System, the PCD has a procedure of "upliftment", under
    which PCD Nominee will now transfer back to the stockholder the legal title to
    the shares lodged in order that legal and beneficial title will once again be
    consolidated in the stockholder; that under this process, the Jumbo Certificate
    is surrendered to the Transfer Agent, which then issues a new stock
    certificate in the name of the uplifting stockholder and a new Jumbo
    Certificate for the balance; and that again, no consideration is paid for the
    transfer of legal title back to the beneficial owner.
    In reply, please be informed that the conveyance of the legal title over
    the shares to a trustee or nominee without transfer of beneficial title and
    without any consideration does not involve an actual transfer of ownership
    over the shares, hence, not subject to the capital gains tax and documentary
    stamp tax. Thus, your opinion that the transfer of legal title over the shares
    from the lodging stockholders to PCD Nominee Corp., or
    from PCD Nominee Corp. to the uplifting stockholders, is not subject to capital
    gains tax or stock transaction tax and documentary stamp tax because there
    is no actual transfer of ownership over the aforementioned shares of stock is
    hereby confirmed. (BIR Ruling Nos. UN-258-95, 123-93, 124-93, 125-93, 127-
    93, 128-93 and 129-93) However, the transfers of beneficial ownership over
    the lodged shares shall be subject to capital gains tax or stock transaction tax,
    as the case may be, and to documentary stamp tax.
    Moreover, under Section 191 of the Documentary Stamp Tax
    Regulations (Revenue Regulations No. 26), the conveyance of property to a
    trustee is exempt from documentary stamp tax. Section 191 of said
    Regulations provides:
    "Section 191. Conveyance to trustees or from trustee to cestui
    que trust, without consideration. Conveyances to a trustee without
    valuable consideration, or from a trustee to a cestui que trust without
    valuable consideration are not subject to tax."
    Thus, your opinion that the conveyance of the shares from the
    stockholders to the nominee — PCD Nominee Corporation and versa, is not
    subject to documentary stamp tax pursuant to Section
    191 of Revenue Regulations No. 26, otherwise known as The Documentary
    Stamp Tax Regulations, is likewise hereby confirmed.
    Accordingly, the Transfer Agents of the publicly listed companies may
    cancel the outstanding shares certificate in the name of the stockholders and
    issue the Jumbo Certificate in the name of PCD Nominee Corporation for
    immobilization. Likewise, in the event a shareholder withdraws his
    stockholdings from the PCD System, the Transfer Agents shall likewise issue
    a new stock certificate in the name of the uplifting stockholder and a new
    Jumbo Certificate for the balance upon surrender of the original Jumbo
    Certificate in order that the legal and beneficial title will once again be
    consolidated in the stockholder.
    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. 
    aisadc

    Very truly yours,

    LIWAYWAY VINZONS-CHATO
    Commissioner of Internal Revenue
     (Transfer of Legal Title to Outstanding Shares of Stock, Without a Transfer of
    |||

    Beneficial Title, from Stockholders to the Nominee, and Vice-Versa, Not Subject
    to Capital Gains Tax Nor to the Stock Transaction Tax and the Documentary
    Stamp Tax , BIR Ruling No. 039-97, [April 3, 1997])

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