BIR Ruling No. 319-2020

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Sec.24(C),1997 Tax Code,as amended

OT-319-2e2 3ON 5 BIR Ruling No.31-99

5/F SGV II Building, 6758 Ayala Avenue Makati City 1200 Herrera Teehankee & Cabrera Law Offices

Attention: Atty. Arsenio C. Cabrera, Jr. Atty.Maximo Modesto Joel C.Flores and

Gentlemen:

subject to (1) income and capital gains taxes; (2) donor's tax: and (3) documentary stamp tax Mr. Rajan Ashok Uttamchandani (the Trustor/Assignee" or Mr. Uttamchandani") is not under the 1997 Tax Code, as amended. stocks ("Rubiyat shares") held by him, as Trustee, in favor of the real beneficial owner thereof. the transfer and/or assignment of Rubiyat Holdings Corporation (the "Corporation") shares of Anil S. Buxani (theTrustee/AssignororMr. Buxani") for confirmation of your opinion that This refers to your letter dated July 23, 2019 requesting on behalf of your client, Mr

Background:

1. On February 21,2014, Mr. Buxani, the registered owner of

Corporation executed a "Declaration of Trust" in favor of Mr. Uttamchandani, who is the beneficial owner of the Rubivat shares. , common shares of the

2.Under the Declaration of Trust, Mr. Buxani acknowledged and confirmed that:

a The funds used to pay for the Rubiyat shares were advanced by

Mr. Uttamchandani;

D He is holding legal title to the Rubiyat shares in trust for Mr. Uttamchandani

who is the real, actual and beneficial owner of the Rubiyat shares; and

C He has absolutely no interest or lien upon the Rubiyat shares whether now

existing or merely inchoate.

OT- SDN 15 2 Herrera Teehankee & Cabrera (Mr. Anil S. Buxani) Page 2 of 3

3. On November 20, 2018, the Corporation, then an entity in the process of Mr. Buxani executed a Subscription Agreement whereby the latter subscribed to incorporation, represented by its Treasurer-in-Trust, Ms. Angelita L. Maniacup and

common shares with an aggregate par value of

Pesos (P

4. On March 19, 2019, the Corporation issued the corresponding Stock Certificate to Mr. Buxani.

5. On March 21, 2019, Mr. Buxani and Mr. Uttamchandani executed a Deed of to the Rubiyat shares in favor of Mr. Uttamchandani. Assignment wherein the former transferred and assigned all his rights and interests

6. On June 30, 2019, Mr. Buxani and Mr. Uttamchandani executed a Deed of

Termination of Trust affirming that the Declaration of Trust dated February 21, 2014 is deemed terminated.

In reply, please be informed as follows:

1.Section 24(C) of the 1997 Tax Code, as amended, provides

rate of fifteen percent (15%) is hereby imposed upon the net capital gains disposition of shares of stock in a domestic corporation, except shares sold, or Exchange.' -- The provisions of Section 39(B) notwithstanding, a final tax at the realized during the taxable year from the sale, barter, exchange or other disposed of through the stock exchange. " "(C) Capital Gains from Sale of shares of Stock not Traded in the Stock

a domestic corporation held by a Trustee in favor of the Trustor without monetary consideration is not subject to income and capital gains taxes since the transfer is merely a confirmation of title/ownership in favor of the beneficial owner hence, not a sale, barter or exchange of the said shares of stock.? In several cases, this Office had occasion to ruie that the transfer of shares of stocks in

Applying the foregoing, the transfer of the Rubiyat shares from the Trustee, Mr. Buxani to the Trustor, Mr. Uttamchandani, the real owner thereof, without monetary consideration and by virtue of the Declaration of Trust is not subject to income tax and capital gains tax.

2. Well-settled in our jurisprudence is the fact that the essential elements of a valid

of the donee; and (3) the intent to do an act of liberality (animus donandi). donation are: (1) the reduction of the patrimony of the donor,(2) the increase in the patrimony

2 gIR Rulings Nos.31-99 dated 19 March 1999, DA-C-315) 776-09 dated 14 December 2009; DA-392-08 dared 1 The capital gains tax on sale of shares of stock not listed and not traded in a locai stock exchange was increasea 30 June 2008; DA-484-06 dated 9 August 2006; DA-291-2005 dated 27 June 2005; DA-485-2004 dated 10 from 5%/10% to 15% by RA 10963.

Ceptember 2004;

Herrera Teehankee & Cabrera (Mr. Anil S. Buxani) Page 3 of 3 0-031 J

the Rubiyat shares which he held in trust for the latter as shown by the execution of the Declaration of Trust. Thus, the aforesaid transfer and/or assignment of the subject shares will be treated as a continuation and confirmation of ownership in favor of the ultimate and real not be subject to gift tax since there is no intention to donate, and the transaction is merely to beneficiary of the Rubiyat shares. Clearly, there is no intention on the part of Mr. Buxani to donate to Mr. Uttamchandani

Regulations No. 26), the conveyance of property to a trustee is exempt from documentary stamp tax (DST). Section 191 of said Regulations provides: 3. Under Section 191 of the Documentary Stamp Tax Regulations (Revenue

"Section 191. Conveyance to trustees or from trustee to cestui que trust,

withoutconsideration. Conveyances to a trustee without valuable

consideration, or from a trustee to a cestui que trust without valuable

consideration are not subject to tax."

Accordingly, the transfer of the said Rubiyat shares is not subject to DST imposed under

Section 176 of the 1997 Tax Code, as amended. However, the notarial acknowledgment is

subject to the DST of P: pursuant to Section 188 of the same Tax Code as amended by

Republic Act No.10963 or the TRAIN Law.

This ruling is being issued on the basis of the foregoing facts as represented. However.

if upon investigation, it will be ascertained that the facts are different, then this ruling shall be

considered null and void.

Very truly yours,

aw oAa

CAESAR R.DULAY

Commissioner of Internal Revenue

K- 035394