BIR Ruling No. 360-2021

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

Secs. 24(C); 98; 175; RR 13- 2004 BIR Ruling No. OT-0653-2020 gCT J 4 2ZH 32- 22

Makati City SALVADOR LLANILLO BERNARDO 815-8i6 Tower One and Exchange Plaza Ayaia Triangle, Ayala Avenue

Attention: Attys. Maria Rosario L. Bernardo Rachelle Anne D. Gutierrez and

Gentlemen:

Philippines, Inc. (the "Wyeth"), for confirmation that the transfer of Wyeth's Membership Shares in Manila Polo Club from its old trustee to its new trustee is exempt from capital gains tax (CGT) and documentary stamp tax (DST). This refers to your letter dated August 8, 2018 requesting on behalf of your client, Wyeth

Background:

and engaged in business in the Philippines. Wyeth is the beneficial owner of a Membership Share and General Manager. with Manila Polo Club (MPC) evidenced by Proprietary Membership Certificate No. 6985 (the -"Membership Share"), which is registered in the name of whoever is serving as Wyeth's President Wyeth is a domestic corporation registered with the Securities and Exchange Commission

Declaration of Trust dated November 23. 2015 where he acknowledged that Wyeth is the actual owner of the Membership Share, and that the registration of the Membership Share in his name is made in compliance with the rules of the MPC. Eugene B. David, who had previously served as Wyeth's President and General Manager and. accordingly, its trustee of the Membership Share. In line therewith. Mr. David executed a At present, the Membership Share of Wyeth in MPC is placed under the name of Joseph

In view thereof, Wyeth seeks to appoint Mr. Demeyere as the new trustee of its Membership Share in MPC and to place the Membership Share in his name. Mr. Demeyere iikewise executed a Declaration of Trust dated July 30, 2018 for this purpose. In 2018, Wyeth appointed Mr. Bert Demeyere as its new President and General Manager.

Sections 24(C): 175: RR No. 13-2004 Trunsfer of Club Shures from one Assignee to Another

We reply, as follows:

is not subject to CGT and DST. The transfer of Membership Share from Mr. David to Mr. Demeyere

and Mr. Demeyere. Upon execution of the Declaration of Trust, a trust relationship was created between Wyeth

equitable ownership of the property. In a trust relation, legal title is vested in the fiduciary while equitable ownership is vested in a cestui que trust. latter. What distinguishes a trust from other relations is the separation of the legal title and property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise'of certain powers by the A trust is a legal relationship between one person having an equitable ownership of

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

to Wyeth. Here, the trustor and the cestui que trust is Wyeth while the fiduciary, also known as the trustee, is the assignee, Mr. Demeyere. and that he is holding only the legal ownership of the same with the beneficial ownership pertaining Transfer did not give him any kind of right, claim or interest whatsoever in the Membership Share In the Declaration of Trust which Mr. Demeyere executed, he acknowledged that the

invested with legal title but is obiigated in equity to hold his legal title for the benefit of another. circumstances of the consideration involved in a transaction whereby one person thereby becomes another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself.3 The principle of a resulting trust is based on the equitable doctrine that valuable consideration, and not legal title, determines the equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the nature or A trust arises in favor of one who pays the purchase money of property in the name of

the company. share under the name of respondent Mendoza, Sime Darby's sales manager at the time. The only limited to the use and enjoyment of the club's facilities and privileges while employed with disallowed by ACC's By-Laws to acquire and register the club share under its name, registered 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 latter's title was club share in Alabang Country Club ("ACC In the case of Sime Darby Pilipinas, Inc. v. Mendoza3. Sime Darby acquired a Class "A ") in 1 987, but being a corporation which was expressly

the rules of MPC, only natural persons may become registered members. which title entitles the trustee only to the use and enjoyment of the club's facilities since, under Wyeth purchased the Membership Share and intends to give legal title thereto to its trustee,

+ Spouses I'rinidad v. !mson, G.R. No. 197728, 16 September 2015. " (i.R. No. 202247. 19 Junc 2013. 2Resurreccion de L.eon. et al. v. Emiliano Molo-Peckson, et al.. G.R. No. L.-17809. 29 December 1962. 3 Marsh Thomson v. Court of Appeals and the American Chamber of Commerce of the Philippines. Inc., (.R. No. H16631, 28 Soledad Caczo substituted by William Caezo and VictorianoCaezo v. Concepcion Rojas. G.R. No. 148788. 23 November 2007. October (998

Sections 24(C): 175; RR No. 13-2004 Trunsfer of Club Shares from one Assignee to Another

assignee/trustee, is not subject to CGT considering that the transfer involves neither monetary consideration nor change in beneficial ownership. The transfer of the legal title of the Membership Share to Mr. Demeyere, Wyeth's new

gain or profit from the sale of capital assets. shares sold, or disposed of through the Stock Exchange. In other words, CGT is imposed on the provides that CGT is 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 Section 24(C) of the National Internal Revenue Code of 1997 (Tax Code), as amended.

will be limited only to the transfer of the iegal title. oid trustee to Mr. Demeyere who will be Wyeth's new trustee. Since Mr. David only possessed legal title over the Membership Share, the transfer of the share as between him and Mr. Demeyere In this case, the Membership Share will be transferred from the name of Mr. David as the

to make him an extension of Wyeth's ownership over the same. Practically speaking, being a Share, hence, nust assign someone to use the club facilities on its behalf. juridical entity, Wyeth cannot directly enjoy the privileges that come with owning the Membership The intention of Wyeth in giving legal title of the Membership Share to Mr. Demeyere is

no actual transfer of ownership of the Membership Share as'between Wyeth and its trustee and/or from such trustee to the next trustee, and therefore, no gain or profit shall be recognized. Since the beneficial ownership over the Membership Share remains with Wyeth, there is

consideration, and consequently no gain or profit involved in the transfer which is merely by virtue of an assignment as evidenced by the Declaration of Trust dated July 30, 2018, this Office confirms that the transfer is not subject to CGT. Therefore, considering that there is no actual transfer of ownership and no monetary

The Transfer of Membership Share is not subiect to DST

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

ownership of the shares of stock from one person to another. Section 4 of RR No. 13-2004 a sale or exchange to be taxable, there must be an actual or constructive transfer of beneficial provides, to wit: Structure and Administration of the Documentary Stamp Tax' qualified this rule by stating that for provisions of Republic Act (RA) No. 9243, otherwise known as An Act Rationalizing Further the Revenue Regulations (RR) No. 13-2004 dated December 23, 2004, implementing the

transfer of beneficial ownership of the shares of stock from one person to another. in the certificate of stock or in the Stock and Transfer Book of the issuing corporation Such transfer may be manifested by the clear exercise of attributes of ownership over such stocks by the transferee, or by an actual entry of a change in the name appearing "For a sate or exchange to be taxable, there must be an actual or constructive

Salud v. Commissioner of Internal Revenue, C.T.A. HB CASE NO. 412. 30 April 2009 7 RR 3-2004

Sections 24(C): 175: RR No. 13-2004 4 Transfer of Club Shares from one Assignee to Another

or by any entry indicating transfer of beneficial ownership in any form of registry including those of a duly authorized scripless registry, such as those maintained for stock from a resigned trustee to a newly appointed trustee such certificate of stock board or to qualify them to perform any act in relation to the corporation shall not be underscoring supplied) or by the Philippine Stock Exchange. However. if by the transfer of certificates of trustee is constituted as mere depository of the stock, such transfer is not taxable. 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 remains in the name of the cestui que trust or the resigned trustee so that the new Provided, however, that transfer of shares to "nominees" to qualify them to sit in the

constructive transfer of the beneficial ownership of the share. Only the legal title was transferred Mr. Demeyere to hold the share in trust for Wyeth. when Wyeth changed its assignee from Mr. David to Mr. Demeyere. Second, the execution of and by the express provisions of the Declaration of Trust, the intention of the parties was clearly for The herein Transfer complies with the afore-cited rules. First, there is no actual or

Inc., the Supreme Court explained that Section 175 and 176 of the Tax Code on DST contemplates the execution of a subscription agreement in order for a taxpayer to be liable to pay the DST. The Supreme Court ruled, thus: Furthermore. in the case of Commissioner of Internal Revenue v. First Express Pawnshop.

stock subscription is a contract by which the subscriber agrees to take a certain number of shares of the capital stock of a corporation, paying for the same or contemplate a subscription agreement in order for a taxpayer to be liable to pay the unissued stocks in an existing corporation or a corporation still to be formed. A expressly or impliedly promising to pay for the same. DST. A subscription contract is defined as any contract for the acquisition of "As pointed out by the CTA, Sections 175 and 176 of the Tax Code

that there would be no transfer of beneficial ownership of the Membership Share. The same remains with Wyeth. ownership of the share is, therefore, not the taxable transaction being contemplated under the Tax Code provisions on DST. That the transfer from Mr. David to Mr. Demeyere is without a subscription agreement or any kind of consideration is indicative of the real intention of the parties A mere transfer of a share from one trustee to another, without change in the beneficial

ownership of the subject shares of stock, and, effectively, no transfer of shares as contemplated being no new conveyance to speak of, there was no new exercise of a privilege that may be taxed. under Section 175 of the Tax Code. In Brodett case, the transfer was merely a continuation and confirmation of title in favor of the ultimate and real beneficiary of the subject properties. There (CTA) ruled that a deficiency assessment of DST is invalid where there is no shift in the beneficial In the case of Brodett v. Commissioner of Internal Revenue?, the Court of Tax Appeals

8 (.R.Nos. I72045-46. 16 June 2009 " CTA Case No. 7049. 09 January 2009.

D Sections 24(C); 175; RR No. 13-2004 Transfer of Club Shares from one Assignee to Another 5

conveyance to Mr. Demeyere of the beneficial ownership of or any right, claim or interest over the Membership Share or over the assets of Wyeth. 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. However, the Declarations of Trust are subject to DST imposed under Section 188 of the Tax Code. In view thereof, the herein Transfer cannot be subject to DST as there is no transfer or

upon investigation, it will be disclosed 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. However, if

aa Very truly yours.

Commissioner of Internal Revenue CAESAR R. DULAY

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