BIR Ruling No. 445-2022

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE

National Office Building Quezon City

Sec.27(A)&(D2),98,176& 188,Tax Code,as amended BIR Ruling No. OT-421-21 C-445-2022 DEC 2 9 2022

Salcedo Village, Makati City 1227 Liberty Center -Picazo Law,104 H.V.dela Costa Street Picazo Buyco Tan Fider & Santos Law Offices

Attention: Atty. Cynthia L. De La Paz Atty.Hillary Fave A.Mercado Gentlemen:

by AIG Philippines of legal title over its proprietary share in Manila Polo Club Inc. gains tax (CGT) and documentary stamp tax (DST). Inc. ("AIG Philippines" or the Company") for a confirmatory ruling that the transfer MPCor theClub, from its current trustee to its new trustee,is not subject to capital This refers to your request on behalf of your client, AIG Philippines Insurance,

Background

1.AIG Philippines is a domestic corporation authorized to engage in the business of non-life insurance in the Philippines.

2.AIG Philippines is the beneficial owner of a proprietary share in MPC (the in its books as part of its assets as of December 31, 2021. over the MPC Share, however, remains with AIG Philippines. The Company maintains beneficial ownership over the MPC Share, the same being recorded amenities of MPC while employed by the Company. Beneficial ownership enjoyment of its facilities is limited only to natural persons. Since only natural persons can enjoy the facilities of the Club, AIG Philippines, as a matter of course, assigns its proprietary share in MPC to its current President & CEO (the "officer) for the sole purpose that he or she may enjoy the facilities and MPC Share. While a proprietary share in MPC may be owned by a corporate entity, the policy of MPC is that admission to Club membership and

3. AIG Philippines's MPC Share is covered by Proprietary Membership August 31, 2020, Mr. Lwin resigned and in his place Mr. Gary Wong (Mr. Wongwas appointed as AIG Philippines's President & CEO on March 15 2021 (effective March 17.2021) Certificate No. 6807 which is presently in the name of Mr. Mark Randall Lwin Mr. Lwin) who previously served as the Company's President & CEO.On

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4.AIG Philippines now seeks to transfer Proprietary Membership Certificate No. the MPC Share and to confirm his status as the new trustee in respect of the MPC Share. 6807 from the name of Mr.Lwin to the name of Mr.Wong.A Deed of Company and Mr. Wong to evidence Mr. Wong's holding of legal title over Assignment and Declaration of Trust was executed by and between the

5.In particular, the Deed of Assignment and Declaration of Trust confirms that:

a. Mr. Wong is substituted as trustee of AIG Philippines (the principal) in respect of the MPC Share; b.Only legal ownership over the MPC Share is transferred to him while the beneficial ownership of the MPC Share remains with AIG Philippines;

c. He does not have any other title, right, claim or interest whatsoever person shall be admitted as a proprietary member of the Club and while he is an officer of the Company; over the MPC Share, as the transfer of legal title is for the sole to make him qualified to use or avail of the facilities of the Club purpose of complying with the rules of MPC that only a natural

d. Upon the occurrence of any event which will cause him to cease Directors of AIG Philippines may designate another company MPC Share;and from being the company officer designated to hold the MPC Share officer it deems qualified to be the holder of legal title over the and enjoy the benefits and privileges thereof, the Board of

No consideration is/will be paid for the transfer to Mr. Wong of the legal title over the MPC Share. 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

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

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

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

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

The Transfer is not subject to donor's tax.

donation are: (1) the reduction of the patrimony of the donor; (2) the increase in the patrimony of the donee; and (3) the intent to do an act of liberality (animus donandi). Well-settled in our jurisprudence is the fact that the essential elements of a valid

purpose. Thus, the transfer will not be subject to donor's tax since there is no intention to Trustee-appointee the MPC Share since the transaction is purely for a legitimate business donate, and the transaction is a bona fide transaction effected solely for business reasons. Clearly, there is no intention on the part of AIG Philippines to donate to the new

The Transfer is not subject to DST.

beneficial ownership of the shares of stock from one person to another. Section 4 thereof provides: corporation is subject to DST upon execution of the deed transferring ownership or rights thereto, or upon delivery, assignment or indorsement of such shares in favor of another. 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 sale or exchange to be taxable,there must be an actual or constructive transfer of The rule in this jurisdiction is that the assignment of shares of stock of a domestic Revenue Regulations (RR) No. 13-2004, implementing the provisions of Republic The transfer is not subject to DST under Section 175 of the Tax Code, as amended.

exercise of attributes of ownership over such stocks by the transferee,or constructive transfer of beneficial ownership of the shares of stock from one person to another. Such transfer may be manifested by the clear "For a sale or exchange to be taxable, there must be an actual or

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

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including those of a duly authorized scripless registry, such as those maintained for or by the Philippine Stock Exchange. However, if by the 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 indicating transfer of beneficial ownership in any form of registry

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 (Emphasis and underscoring supplied.) 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. transfer of certificates of stock from a resigned trustee to a newly appointed trustee such certificate of stock remain in the name of the cestui que trust that transfer of shares to "nominees" to qualify them to sit in the board or to qualify them to perform any act in relation to the corporation shall not or the resigned trustee so that the new trustee is constituted as mere depository of the stock, such transfer is not taxable. Provided, however.

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

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

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

Very truly yours.

RO MEOD.LUMAUI, JR.

K-1-MCUS Commissioner of Internal Revenue 000953