BIR Ruling No. 297-2020

BUREAU OF INTERNAL REVENUE REPUBLICOF THE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

Section 24 (C) of National Internal Revenue Code of 1997. as amended: RR No. 6-2008: RMO No. 15-2003 0T-0297-2020 Date: JUN 0 8 2020

Seminary Road, Bahay Toro, Quezon City 1106 Unit 8, Lot 1 PAGCOR VILLAS, DIOSDADO P.GARCIA

Sir:

received as judgment award from your former employer, RENATO T. CLAROS and/or Prince Transport, Philippines, Inc. is exempt from the payment of transfer taxes. other awardees, confirmation that the transfer of shares of stock of Giant Philippines, Inc.. This refers to your letter dated June 4, 2019 requesting for and on behalf of the

holiday pay, service leave pay, 13th month pay, moral and exemplary damages and Philippines, Inc. and Mr. Renato Claros vs. Diosdado Garcia, et. al. with G.R. No. illegal deductions and praying for the award of premium pay for holiday and rest day. attorney's fees against their employer, which was docketed as Prince Transport filed a case before the Supreme Court for illegal dismissal, unfair labor practice and 167291. As represented, the complainant-employees of Prince Transport Philippines, Inc.

represented, on July 12, 2018, you were able to successfully levy the 5,000 shares of Stocks of Giant Philippines, Inc. owned by Renato T. Claros. employees, which decision became final and executory on April 19, 2011. As further On January 12, 2011 the Supreme Court rendered a decision in favor of the 42

awardees but you were informed that transfer taxes must be paid first and a clearance shares of stock may be transferred. Hence, the request. from the Bureau of Internal Revenue must be presented before the ownership of the You now seek to transfer the ownership of the shares of stock in favor of the

backwages of the 42 employees and the amount representing their unpaid salaries are In reply thereto, please be informed that the amount received corresponding to the

remuneration for services that are deemed to have been performed by them for RENATO

O

Diosdado P. Garcia - Prince Transport, Philippines, Inc. Page 2 of 3 OT-0237-2820 JUN 0 8 2020

T. CLAROS and/or Prince Transport, Philippines, Inc. prior to or during the period of their illegal dismissal from the service.

salaries are subject to income tax and consequently, to the withholding tax on wages Revenue Regulations No. 2-98, as amended. (BIR Ruling No. 003-2004 dated January 19, pursuant to Section 79, Chapter XIII, Title II of the Tax Code as implemented by 2004) Such being the case, said backwages and the amount representing their unpaid

benefits of the employees is not subject to withholding tax on wages under Section 32 (B) (6) (b) of the 1997 Tax Code, as amended, considering that the separation of the employees is beyond their control. On the other hand, the amount awarded corresponding to the separation pay or

Code, as amended, provides: With respect to the transfer of shares of stocks to the awardees, Sec. 24 of the Tax

"SECTION 24. Income Tax Rates.

XXX XXX XXX

"(C) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. -- The provisions of Section 39(B) notwithstanding, a final tax at the rates of fifteen percent (15%) is hereby imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or

other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange.

Accordingly, the phrase "other disposition" includes within its purview all kinds

of disposition of real property under Section 24 (C) of the Tax Code of 1997, as amended.

unless specifically excluded therefrom or subject to another tax treatment pursuant to different provisions of the National Internal Revenue Code of 1997, as amended.

Thus, the transfer the ownership of the shares of stock in favor of the awardees, in the absence of a specific law excluding it from the coverage of Section 24 (C) of the Tax

Code of 1997, as amended, is deemed included within the purview of the said provision.

Therefore, it shall be subject to fifteen percent(15%) capital gains tax (CGT).

Moreover, the conveyance being a disposition of shares of stock under Section 24 (C) of the Tax Code of 1997, as amended, is likewise subject to the documentary stamp taxes (DST) imposed in Section 188 of the Tax Code of 1997, as amended.

Revenue Memorandum Order (RMO) No. 15-2013 dated May 8, 2003 prescribes the policies, guidelines, and procedures, including the documentary requirements, in the issuance of Certificates Authorizing Registration (CARs) for transactions subject to capital gains tax on the sale, barter, transfer, or assignment of shares of stock not traded in the Stock Exchange. Accordingly, a CAR is necessary before any transfer of shares of

Stock not traded in the Stock Exchange may be transferred in the books of a corporation.

Diosdado P. Garcia -Prince Transport,Philippines, Inc. Page 3 of3 OT0 29722 UN 0 8 2020

Exchange, it is necessary to secure a CAR pursuant to the process laid down in RMO No. 15-2003. The receipts of the payment of the tax should also be filed with and recorded by the secretary of the corporation pursuant to Section 11 of RR No. 6-2008. Hence, in order to transfer ownership of shares of stock not traded in the Stock

However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours

Commissioner of Internal Revenue 1Re3a7w-aV CAESAR R. DULAY

K- Q 034313