BIR Ruling No. 295-2022

FIPUBHHHTHF PHIIPPINFS

BUREAU OF INTERNAL REVENUE DEPARIMF NT OF FINANCH

Quezon City

Secs. 24 (C): 98: 175. of the Tax Code of :997. as amended: BIR Ruling No. OT-467-2021 BIR Ruling No.OT-338-2021: RR No. 13-2004 BIR Ruling No. OT-421-2021: OT-295-2

JUN 2 n 2OZ2

26th Street corner l Ith A , etue. BGC. Taguig City LEAGOGO LAW OFFI'E Unit 1908. Tower 2 Hi h % treet Corporate Plaza

Attention: Attys. Jose Lis C. Leagogo Pola Lia Celina L. Lamarca McDonald Abalos and

Gentlemen:

change of trustee of th. Nanila Polo Club Inc. (MPCI) Membership share from one trustee to another trustee is not si hj et to capital gains tax (CGT). donot's tax and documentary stamp tax (DST) SHANGHAI BANKIN G CORPORATION LIMITED (the "HSBC^). for confirmation that the This refers to .otr request. on behalf of your client. THE HONG KONG AND

Background:

the Phitippines through its Philippine B:anch with address at HSBC Centre 3058 Fifth Avenue. West Bonifacio Global it.. Taguig City . HSBC is'a corp ra'ion dulyreg:i tered in Hong Kong and is authorized to do business in

"Club") covered by Pro:; ri.tary Membership Certificate No. HSBC purchase: a proprietary sHare in Manila Poio C ib Inc. ("Manila Polo Club" or the

admitted as proprietary nenbers. to wit Under Article 7t :) Mf the Club's Articles of Incorporation. only natural persons shall be

person shal h : entitled to own more than one proprietary membership certificate. "(c) Only r itral persons nall be admitted as proprietary members. No

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OT-295-2D22

JUn 2r

Sectio1s 24(C): 1-5: RR. 0:3-2004 HSBC-Transfer ot ( Tub S. ar s trom one Assignee to Another e

Though only n. tu:al persons "are admitted as proprietary members. the Proprietary Membership Certificate tslf may be owned hy a corporate entity. As could be gleaned in Article 7(c) above. admission t: be a member and enjoy the facilities ot the Club is limited only to natural persons. but as regards wiership of the proprietary membership certificate, it may be owned by a corporation. If the ittention is to limit its application to "natural" persons. the Articles of Incorporation should ha e :tated so. With respect to owning the certificate, the second sentence of Article 7(c) uses the o1:1 "person" in the generic sense. and therefore includes corporations.

Since only nati rat persons can enjoy the facilities. HSBC assigns the proprietary Membership share in M nita Polo Cluh ("MPCI Share") to a Senior executive ("trustee") for the sole purpose that he or s te may enjoy the facilities and amenities of MPCI while he or she works at HSBC. Ownership ot th MPCI Share. however. remains with HSBC.

Thus. HSBC ma nt:ins the beneticial ownership over the MPCI Share as the same forms part of HSBC's assets at d is recorded in its hook account.

On the other han. . the trustee executes a Declaration of Trust in favor of HSBC confirming that there is no transfer : t'hneficial ownership of the MPCI Share. In the Dectaration of Trust. it is shown that:

a)HSBC has purch :se I a proprietary: share of Manila Polo Club. Inc.: h) Only legal own "st ip over the proprietary membership certificate is transferred to the senior executive vh:le the beneficial ownership of the MPCI Share remains with HSBC:

d) The senior execu ive: has no title. right. claim or interest whatsoever in the MPCI Share and e) No consideration w: s paid for the transfer of the MPCI Share to the senior executive. c) The transfer is fe : the sole purpose of making the senior executive qualified to avail of the the replacenent : ertificate that will be issued: use of the faciliti 's of Manita Polo Club. Inc.:

the trustee uses the facili ie: of Manila Polo Club. Membership Certificate s i sued by Manila Polo Club in the nanie of the trustee, upon submitting a copy of the Declaratior ot Trust. The trustee is then issued a card. which is presented every time In order for the uustee to enjoy the facilities of Manila Polo Club, a Proprietary

request is currently unde tl:e naine of Mr: Roberto D. Baltazar. The MPCI Share co' ered by Proprietary Membership Certificate No. subject of this

Manila Polo Club. in tl is regard. he wrote a letter to Manila Polo Club to inform them of his resignation and executed a Pelease form over the MPCt Share. Upon his resigna ion from HSBC. Mr. Baltazar also resigned as an assignee member of

execuled a Declaration : f rust in favor of HSBC. Pursuant to the Declaration of Trust dated Fehruary 21. 2022. Mr. Br 'mridge is the current trustee for the MPCI Share. A replacement On February 21. 2022. Mr. Henty: Baker Bremridge. HSBC's Chief Operating Officer.

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T-225-2022 jijf} 2 0 2022 Sectious 24(C): 1-5: RR ' .13-200 HSBC-Transfer ot' luh S. tr. s from one Asuignee to Another 3

proprietary membership se: rificate. however, has not yet been issued to him until a ruling from the Bureau of Iinternal Reve su. is issued in Jis favor.

We reply. as foll w -:

is not subject to C T1 and DST. The transfer of MC Share from .Mr. Roberto D. Baltazur to Mr. Henry Baker Bremridge

and Mr. Henry Baker B: 'niridge Upon execution : f the Declaraticn of Trust. a trust relationship was created between HSBC

latter. What distinguish 's : trust from.other relations is the separation of the legal title and equitable ownership of : :e property. In a trust relation. legal title is vested in the fiduciary while equitabie ownership is y st d in a cestui que trust'. property and another per or owning the legal title to such property, the equitable ownership of the former entitling him to tl e jerformance of certain duties and the exercise of certain powers by the A trust is a leg ! relationship between one person having an equitable ownership of

acknowledges that the pi op -rty. title to which he holds. is held by him for the use of another?. In relation theret v. + declaration of trust has been defined as an act by which a person

to HSBC. Here. the tru: tot and the cestui que trust is HSBC while the fiduciary. also known as the trustee. is the assigne s. ". Ir. Henry Baker Bremridge. that the transfer did not g Vt him any kind of right. ciaim or interest whatsoever in the MPCI Share and that he is holding onl tl e legal ownership of the same with the beneficial ownership pertaining In the Declaratioi o: Trust which Mr. Henry Baker Bremridge executed. he acknowledged

invested with legal title t ut is obligated in equity to hold his legal title for the benefit of another.t therein for himself.3 Th : rrinciple of a" resulting trust is based on the equitable doctrine that valuable consideration. ini not legat title. determines the equitable title or interest and are presumed always to ha e been contemplated by the parties.' They arise from the nature or circumstances of the con id.ration involved in a transaction whereby one person thereby becomes another. hecause of the pre :umption tha: he who pays for a thing intends a beneficial interest A trust arises in ay or of one who pays the purchase noney of property in the name of

club share in Alabang Co imtry Club ("ACt in 1987. but being corporation which was expressly disallowed by ACC's By- La vs to acquire and register the club share under its name. registered the share under the name o ' r:spondent Mendoza. Sime Darby's sales manager at the time. The In the case of Sir e Durby Pilipinus. Inc. v: Mendo-a3, Sime Darby acquired a Class "A"

October 1998 Marsh Thomson v. Court of A pe. = and the American Chamher of Commerce ot the Phitippines. Inc.. G.R. No. 116631. 28 4 Spouses Trinidad y. Imson. G.R \ Resurreccion de Leon. et al. . 1 nil mo Molo-Peckson. et al.. C.R. No. L-17809. 29 December 1962. (R. No. 20224~. 19 June 203 Sotedad Caezo substituted by M .lli en Caezo and Victorianol'aezo s. Concepcion Rojas. G.R. No. 148788. 23 November 2007. 197-28. 16 Septenher 2015.

0-2a5-

JUH 21 27?2 Sculions 34tCt, I"5. RR: 3-300 HSB(-Transter ot (Tub S: m:s trom one Assignee to: Another A

Supreme Court held that a t ust arrangement existed between Siine Darby and Mendoza and while the share was bought by Si'ne Darby and placed under the name of Mendoza, the latter's title was

the company . only limited to the use & id enjoyment of the club's facitities and privileges while employed with

to its trustee-appointee. : .h:ch title entitles the trustee-appointee only to the use and enjoyment of the club's facilities sinc: . tnder the Artictes of Incorporation and By-laws of MPC. only natural In the instant cas . I ISBC purchased the MPCI Share anc: intends to give legal title thereto

persons may become reg st: red members.

The transfer of th : l gal title of the MPCI Share from Mr. Roberto D. Baltazar (oid trustee- appointee) to its new t: usree-appointee. Mr. Henry Baker Bremridge. is not subject to CGT considering that the trat sf: r involves neither monetary consideration nor change in beneficial ow nership.

Section 24{C) ot th National Internal Revenue Code (Tax Code) of 1997. as amended provides that CGT is im} os :d upon the net capital gains realized during the taxable year from the sale. barter. exchange o: o:her disposition of shares of stock in a domestic corporation. except gain or profit from the s: fe -f capital assets.* shares sold. or disposed f hrough the Stock Exchange. In other words. CGT is imposed on the

appointee. Since Mr. R hi rto D. Baltazar only possessed tegat title over the MPCI Share. the transfer of the subject sl .ar. in fav or of Mr. Henry Baker Brentridge will be limited only to the transfer of the legal title. name. as the former tru: :e . to Mr. Henry Baker Bremridge. who will be HSBC's new trustee- In this case. the vl mbership Share will be transferred from Mr. Roberto D. Baltazar's

MPCI Share. hence. mus a' sign someone to use the club facilities on its behalf. being a juridical entity. :SBC cannot directly enjoy the privileges that come with owning the Bremridge is to make hir : ai extension of HSBC's ownership over the same. Practically speaking. The intention ot H :BC in giving legal title of the MPCI Share to Mr. Henry Baker

to the next trustees. and t'net efore. no gain or profit shall be recognized. transter of ownership of te said share as between HSBC and its trustees and/or from such trustees Since the benefici l Donership over the MPCI Share remains with HSBC. there is no actual

1ot subject to CGT. (BI1 R 1ing No. OT-46--2021 dated Decenther 14. 2021) consideration. and conse: ue itly no gain or profit involved in the transfer which is merely by virtue of an assignment as evide nc -d by the Declaration of Trust. this Oifice confirms that the transfer is Therefore. consi ering that there is no actual transfer of ownership and no monetary

The Transfer is no st hject to DST

Sahid s.(ommi>>joner of Inter :+.venuc.(I.A.H B {Sf N0 412. 30 April 20 9

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HSBC-Transfer of Club SI rfrom one Assignee to Another 5 Sections 24(C)175.RR 3-2004 OT-Z95-2022 JUN 2 3 2UEZ

amended. The rule is th it the assignment of shares of stock of a domestic corporation is subject to DST upon execution ot the deed transferring ownership or rights thereto. or upon deliver assignment or indorsemt nt of such shares in favor of another. Likewise.the tra sfer is not subject to DST under Section 175 of the Tax Code of 1997.as

ovnership of the share: o. stock from one person to another: Section 4 of RR No. 13-2004 a sale or exchange to b taxable. there inust be an actual or constructive transfer of beneficial provides.to wit provisions of Republic F ct RANo.9243.otherwise known as An Act Rationalizing Further the Structure and Administr tion of the Documentary Stamp Taxqualified this rule by stating that for Revenue Regula ions (RR) No. 13-2004 dated December 23. 2004, implementing the

transfer of benefic al ownership of the shares of stock from one person to another. Such transfer may e manifested by the clear exercise of attributes of ownership over such stocks by the rarsferee,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 in licating transfer of beneficial ownership in any form of registry including those of duly authorizec For a sale or xchange to be taxable. there must be an actual or constructive ac registry. such as those maintained for or by the Philippin Stock Exchang FT vever.if by the transfer of certificates of

underscoring suppl ed board or to qualify hem to perform any act in relation to the corporation shall not be subject to the DSl povided herein only upon proof of a duly executed Nominee consideration othe than the undertaking of the nominee to only represent the beneficial owner of the stock: and the transfer is in trust. Emphasis and Agreement showinig the purpose of remains in the nan Provided.however th at transfer of shares to stock from a resigi trustee is constituts s mere depo f the cest the transfer: that.the transfer is without ppointed trustee such certificate of stock the stocl "nominees" to qualify them to sit in the resigned trustee so that the new such transfer is not taxable

hold the share in trust for HsBC. constructive transfer of the heneficial owniership of the shares. Only the legal title was transferred when HSBC changed its ippointees from Mr. Roberto D. Baltazar to Mr. Henry Baker Bremridge Second. the execution of and by the express provisions of the Declaration of Trust. the intention of the parties was clearl for Mr.Roberto D.Baltazar and now Mr.Henry Baker Bremridge to The herein tran fer comply with the afore-cited rules. First. there is no actual or

on DST contemplates the ex ecution of a subscription agreement in order for a taxpayer to be liable to pay the DST.The Sur ree Court ruled.thus: Inc..the Supreme Court xplained that Section 175 and 176 of the Tax Code of 1997.as amended. Furthermore. in tl e case of Commissioner of Internal Revenue v. First Express Pawnshop.

G.R.Nos.172045-46.16 June RR 13-2004

Sections 24(): 1-5: RR :3-20)4 HSB(-Transter ot Club Si u trom one Assignee tn Another 6 OT - 2 95 - 2 022 JU t u

contemplate a st: sc ription agreement in order for a taxpayer to be liable to pay the unissued stocks n in existing corporation or a corporation still to be formed. A stock subscripti: n s a contract hy which the subscriber agrees to take a certain number of shart > : f the capital stock of a corporation. paying for the same or DST. A subscri ui..n contract is defined as any contract for the acquisition of expressly or imr ie. !ly promising to pay for the same." "As poir iex! out by the (TA. Sections 175 and 176 of the Tax Code

ownership of the share i .. t ierefore. not the taxable transaction being contemplated under the Tax Code provisions on DS r. That the transfer from Mr. Roberto D. Baltazar to Mr. Henry Baker Bremridge is without a su!scription agreement or any kind ot consideration is indicative of the real intention of the par ie: that there wouid he no transfer of beneficiai ownership of the MPCI Share. The same remai: s "- ith HSBC. A mere transfer of share from.one trustee to another. without change in the beneficiat

interest over the MPCI Sh tre or over the assets of MPCI. There being no new conveyance to conveyance to Mr. Hen y 3aker Bremridge of the beneficial ownership of or any right. claim or speak of in this case. ti: :r: is no new exercise of a privilege upon which DST may be imposed. Consequently. since the e ' .ill be no trar.sfer or conveyance of the MPCI Share from Mr. Roberto D. Baitazar to Mr. Hen 'y 3aker Bremridge. the same shall noi be subject to donor's tax under Section 98 of the Tax C d of 1997. as anended. (BIR Ruling No. OT-338-2021 dated Septemher 3". 2021 and BIR Rulin : \.v. (OT-421-2031 duted Noventher- 8. 3021) In view thereof. th: herein transfer cannot be subject to DST as there are no transfer or

upon investigation. it .i. be disclosed that the facts are different. then this ruling shall be considered null and voi :. This ruling is be int issued on the basis of the foregoing facts as represented. However. if

Very truly yours. a

Commissioner of Internal Revenue CAESAR R. DULAY 0R18f2

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