BIR Ruling No. 417-2022

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Sec. 27(A) & (D)(2), 98,176& 188, Tax Code, as amended BIR Ruling No. OT-421-21

Q:417 - 2 0 2 2 OCT 1 2 2022

NESTLE PHILIPPINES, INC. Nestle Center Makati City 1200 31 Plaza Drive Rockwell Center

Attention: Atty. Arni Perlas Head, Tax Department

Gentlemen:

Requejo), Treasurer and Chief Financial Officer of NPI is not subject to capital gains tax the "Company") for confirmation that the transfer of its Manila Polo Club ("MPC") (CGT) and documentary stamp tax (DST). share from Mr. Mandeep Singh Chhatwal (Mr. Chhatwal) to Mr. Emilio Requejo (Mr. This refers to your request on behalf of client, Nestle Philippines, Inc. ("NPI" or

In view of MPC's policy that only natural persons are allowed to own such proprietary Following this, NPI transferred MPC Proprietary Membership Certificate No. Requejo, as stated in Secretary's Certificate dated October 14, 2021. Membership Certificate No. membership shares, the subject share was registered under the name of its officers in order that they may use the facilities and avail of the privileges of MPC. As the officers finish their assignment or employment, the shares are being transferred to another officer. As represented, NPI is the beneficial owner of MPC share covered by Proprietary . It is retained as an asset in the books of the Company. to Mr.

and confirmed that (i) the Company is the owner of the MPC share; and (ii) they are holding the MPC share for and on behalf of, and in trust for, the Company. Requejo separately executed a Declaration of Trust whereby they acknowledged, declared On August 22, 2016 and October 7, 2021 respectively, Mr. Chhatwal and Mr.

Discussion/Ruling

The transfer of MPC shares from the Transferor to the Transferee is not subject to CGT.

that the property, title to which he holds, is held by him for the use of another. A declaration of trust has been defined as an act by which a person acknowledges

1 Resurreccion de Leon, et al. v. Emiliano Molo-Peckson, et al., G.R. No. L-17809, December 29, 1962.

NESTLE PHILIPPINES, INC. Page 2 of 3 OT- "4 1 7 - 2 0 2 2 OCT 1 2 2022

acknowledged that the transfer did not give them any kind of right, claim, or interest with the beneficial ownership pertaining to the Company. Here, the Trustor is the whatsoever in the MPC share and that he is hoiding only the legal ownership of the same Company while the Trustee is the declarant/appointee. In the Declaration of Trust which the declarant/appointee executed, he

Class "A" club share in Alabang Country Club ("ACC") in 1987, but being a corporation which was expressly disallowed by ACC's By-Laws to acquire and register the club share under its name, registered the share under the name of respondent Mendoza, Sime Darby's sales manager at the time. The Supreme Court held that a trust arrangement existed between Sime Darby and Mendoza and while the share was bought by Sime Darby and placed under the name of Mendoza, the iatter's title was only limited to the use and enjoyment of the club's facilities and privileges while employed with the company. In the case of Sime Darby Pilipinas, Inc. v. Mendoza2, Sime Darby acquired a

title to its Trustee-appointee, which entitles the Trustee-appointee (Mr. Chhatwal) only to Section 24 (C) of the National Internal Revenue Code of 1997 (Tax Code), as amended. beneficial ownership. the use and enjoyment of the club's facilities since, under the Articles of Incorporation and By-laws of MPC only natural persons may become registered members. Thus, the (Mr. Chhatwal) to the new Trustee-appointee (Mr. Requejo), is not subject to CGT under considering that the transfer involves neither monetary consideration nor change in transfer of the legal title of the MPC shares from the former Trustee-appointee In the instant case, NPI, the purchaser of the MPC shares, intends to give its legal

The Transfer is not subject to documentary stamp tax (DST).

thereto, or upon delivery, assignment or indorsement of such shares in favor of another. corporation is subject to DST upon execution of the deed transferring ownership or rights The rule in this jurisdiction is that the assignment of shares of stock of a domestic The transfer is not subject to DST under Section 175 of the Tax Code, as amended.

Revenue Regulations (RR) No. 13-2004, implementing the provisions of Republic

beneficial ownership of the shares of stock from one person to another. Section 4 thereof sale or exchange to be taxable, there must be an actual or constructive transfer of Act (RA) No. 9243, otherwise known as "An Act Rationalizing Further the Structure and Administration of the Documentary Stamp Tax" qualified this rule by stating that for a

provides:

constructive transfer of beneficial ownership of the shares of stock from "For a sale or exchange to be taxable, there must be an actual or

any entry indicating transfer of beneficial ownership in any form of registry one person to another. Such transfer may be manifested by the clear 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 exercise of attributes of ownership over such stocks by the transferee, or

2 G.R.No. 202247, June 19, 2013.

NESTLE PHILIPPINES, INC. Page 3 of 3 OT- 417-202Z OCT 1 2 2022

transfer of certificates of stock from a resigned trustee to a newly appointed be subject to the DST provided herein only upon proof of a duly executed Nominee Agreement showing the purpose of the transfer; that the transfer is without consideration other than the undertaking of the nominee to only represent the beneficial owner of the stock; and the transfer is in trust." (Emphasis and underscoring supplied.) including those of a duly authorized scripless registry, such as those maintained for or by the Philippine Stock Exchange. However, if by the depository of the stock, such transfer is not: taxable. Provided, however, to qualify them to perform any act in relation to the corporation shall not trustee such certificate of stock remain in the name of the cestui que trust or the resigned trustee so that the new trustee is constituted as mere that transfer of shares to "nominees" to qualify them to sit in the board or

However, the notarial acknowledgment to the Deed of Declaration of Trust is subject to DST imposed under Section 185 of the Tax Code, as amended. or conveyance to the new trustee of the beneficial ownership of any right, claim or interest over the MPC share or over the asset of MPC. There being no new conveyance to speak of in this case, there is no new exercise of a privilege upon which DST may be imposed. THEREFORE, the herein transfer cannot be subject to DST as there is no transfer

issue the TCL/CAR as prescribed in Revenue Memorandum Circular (RMC) No. 37- 2012 Corporate Secretary of the Club to effect the transfer of the MPC share in the name of the be presented to the Revenue District Office (RDO) concerned in order for the latter to Transferee-appointee without the necessary Tax Clearance (TCL) and/or Certificate Authorizing Registration (CAR) issued by this Bureau. In this regard, this Ruling shall It is, however, understood that this Ruling shall not serve as authority to the

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 LILIA CATRIS GUILLERMO Chg. L nil

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