BIR Ruling No. 572-2020

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City

Sec. 87 & 97, 1997 Tax Code, as amended

Financial Accounting, Volume One, First Part, 2013 Edition BIR Ruling No. 156-98 & DA-336-08

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ESPINA & YUMUL-ESPINA

2609 Civic Drive, Filinvest Corporate City Alabang, Muntinlupa City 1781 Unit 908 ENTRATA Urban Tower 1 ATTORNEYS-AT-LAW

Attention: RICARDO M. ESPINA FE B. MAGPANTAY

Gentlemen:

alreadybelong to his heirs andthat said stock dividends can be transferred to his heirsithout the necessity of having the Certificate Authorizing Registration and Tax Clearance Certificate stockholder no longer forms part of the inventory of assets of the deceased stockholder as these ZENAIDA S. SARTE ("Mrs. Sarte), requesting for confirmation that BIR Ruling No. 156-98 (DA-336-08) dated June 3, 2008 which ruled that "stock dividends issued after the death of a amended." This refers to your letter dated August 18, 2017, filed in behalf of your client.

The facts as culled from your letter are as follows:

Edgar S. Sarte ("Edgar") was the owner of ( ) shares

of stock in Manulife covered by Share Ownership Statement No. MFC Reference No. (the "Manulife Shares"); with

2 On December 23, 2003, Edgar died in Muntinlupa City, Metro Manila;

3 After Edgar's death, Mrs. Sarte filed a Petition for Judicial Settlement of his Estate

before the Regional Trial Court of Muntinlupa, Branch 203 ("the Court");

4. Proceedings were held and the Court issued an Order dated September 2, 201 1 and

the Certificate of Finality dated September 29, 201 1, settling the deceased Edgar's Estate and adjudicating the Manulife shares to his legitimate wife, Mrs. Sarte;

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5.The corresponding estate taxes were paid in full and the BIR Revenue District Office No. 53-B issued Certificate Authorizing Registration (the CAR) No. dated April 19, 2016 covering the deceased Edgar's Estate;

6. On March 23, 2017 and on behalf of Mrs. Sarte, all the documents were submitted

and the processing fee was paid to RCBC, acting as Manulife's Transfer Agent, for the transfer of the Manulife Shares from the deceased Edgar to Mrs. Sarte;

7. It was at that time when RCBC informed Mrs. Sarte and counsel that the deceased

as dividends on June 2, 2006 or after Edgar's death (the "Manulife Stock Dividends"); Edgar has total of because an additional shares of stock in Manulife shares of stock were declared

8. RCBC was then informed that since the estate tax due on the deceased Edgar's

Estate, including the Manulife Shares, were fully paid and the Manulife Stock Dividends were declared after Edgar's death, the transfer of the Manulife Shares and the Manulife Stock Dividends from the deceased Edgar to Mrs. Sarte should be made by RCBC without necessity of amending the CAR;

9. However, RCBC did not transfer the Manulife Shares and the Manulife Stock

Dividends to Mrs. Sarte and instead required her to first secure a Certification from the BIR that the BIR Ruling No. 156-98 (DA-336-08) dated June 3, 2008 is still effective.

Hence, the request for confirmation.

declaration. The reason is that when dividends are declared, the shareholder acquires the right In reply, please be informed thatdividends are recognized as revenue on the date of

thereto and a legal liability binding on the corporation is created." (Page 678, Financial Accounting, Volume One, First Part, 2013 Edition by Valix, Peralta & Valix)

Section 777 of the Civil Code of the Philippines, provides:

"ART. 777. The rights to the succession are transmitted from the moment of the death of the decedent."

For purposes of determining the estate tax, Section 85 of the Tax Code of 1997.

amended, identifies what constitutes the gross estate of a decedent. It includes the value of all

property, real or personal, tangible or intangible, wherever situated, owned by the decedent at

the time of his death.

Pursuant to Section 97 of the same Code, the heirs must submit to the Corporate Secretary a certification from the BIR that the estate tax has been paid or that the estate is exempt from payment of the said tax as a condition precedent for the acquisition of ownership

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over the shares, viz:

Bonds or Rights. -- There shall not be transferred to any new owner in the books of any corporation, sociedad anonima, partnership, business, or industry by way of gift inter vivos or mortis causa, legacy or inheritance, unless a organized or established in the Philippines any share, obiigation, bond or right cetification from the Commissioner that the taxes fixed in this Title and due theron have been paid is shown." (BIR Ruling No. DA-336-08, June 3, 2008) "SEC. 97.Payment of Tax Antecedent to the Transfer of Shares,

through his death by virtue of intestate succession. From that time on, Edgar ceased to be its owner and any gain or benefit, such as stock dividend, realized from the 545 Manulife Shares shall then on be accounted or credited to the heirs as the owners thereof. Conversely speaking. the 545 Manulife Shares of stock issued as stock dividends shall no longer form part of the inventory of assets of the decedent as they already belong to the heirs. Thus, Edgar's Properties, including the 545 Manulife Shares, are transmitted to his heirs

Based on the foregoing, since the stock dividends were declared on June 2, 2006 when the ownership of the original 545 Manulife Shares has long been transmitted to Edgar's heirs,

this Office confirms your opinion that the Manulife shares issued as stock dividends can be

transferred to Edgar's heirs without amending the Certificate Authorizing Registration and Tax

Clearance Certificate.

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,

1aaia

CAESAR R. DULAY

Commissioner of Internal Revenue

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K1-FR-17-1691 K-1-RSV