BIR Ruling No. 439-2022

REPUBLIC OF THE PHILIPPINES

BUREAU OFINTERNAL REVENUE DEPARTMENT OF FINANCE

National Office Building Quezon City

Secs.24(C),175& 176,Tax Code, as amended BIR Ruling No.OT-0653-2020 CT-439-2022 DEC 0 9 2022

Pres. D. Macapagal Blvd., Pasay City PHILIPPINE NATIONAL BANK

Attention: FVP Aidell Amor R. Gregorio Acting Chief Financial Officer

Gentlemen:

of nominee for the Proprietary Membership previously assigned to Mr. Nelson C. Reyes. This refers to your request for the issuance of a tax-exempt certificate on the change

Background

owns Manila Polo Club (MPC) shares with proprietary membership assigned to the corporation organized and existing under the laws of the Republic of the Philippines. PNB following: As represented, the Philippine National Bank (PNB) is a universal banking

Mr.Nelson C.Reyes Mr. Desmond Sia Mr. Lorenzo V.Tan Nominee Proprietary Membership Certificate No. 6080 6927 5623

only with no money involved. The assignment of the proprietary membership to the above parties is a lateral transfer

from PNB last year, the PNB Board of Directors approved on June 25, 2021, the appointment of Mr. Roberto D.Baltazar,Executive Vice President, as PNB'splaying representative to the MPC. On May 27,2021,Mr.Reyes passed away.In view of the separation of Mr.Reyes

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Discussion/Ruling

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

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 that

ownership pertaining to the Company. Here, the Trustor is the Company while the Trustee is the declarant/appointee. 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 with the beneficiall In the Declaration of Trust which the declarant/appointee executed, he acknowledged

name, registered the share under the name of respondent Mendoza, Sime Darby's sales facilities and privileges while employed with the company. was expressly disallowed by ACC's By-Laws to acquire and register the club share under its 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 latter's title was only limited to the use and enjoyment of the club's "Aclub share in Alabang Country Club (ACC) in 1987, but being a corporation which In the case of Sime Darby Pilipinas, Inc.v. Mendoza2, Sime Darby acquired a Class

(Tax Code, as amended, considering that the transfer involves neither monetary consideration nor change in beneficial ownership. title to its Trustee-appointee, which entitles the Trustee-appointee only to the use and title of the MPC shares from the former Trustee-appointee to the new Trustee-appointee is not subject to CGT under Section 24 (C) of the National Internal Revenue Code of 1997 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 transfer of the legal In the instant case,PNB,the purchaser of the MPC shares, intends to give its legal

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

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

1 Resurreccion de Leon, et al.v. Emiliano Molo-Pecksonet al., G.R. No. L-17809,December 29,1962 2 G.R. No. 202247, June 19, 2013.

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

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. The rule in this jurisdiction is that the assignment of shares of stock of a domestic corporation The transfer is not subject to DST under Section 175 of the Tax Code, as amended.

ownership of the shares of stock from one person to another. Section 4 thereof provides: 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 beneficial Revenue Regulations (RR) No. 13-2004, implementing the provisions of Republic

that the transfer is without consideration other than the undertaking of the is in trust."(Emphasis and underscoring supplied.) nominee to only represent the beneficial owner of the stock; and the transfer taxable. Provided, however, 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 be subject to the DST provided herein only upon proof of a duly executed Nominee Agreement showing the purpose of the transfer; duly authorized scripless registry, such as those maintained for or by the Philippine Stock Exchange. However, if by the transfer of certificates of stock remain in the name of the cestui que trust or the resigned trustee so that the new trustee is constituted as mere depository of the stock, such transfer is not 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 including those of a from a resigned trustee to a newly appointed trustee such certificate of stock constructive transfer of beneficial ownership of the shares of stock from one person to another. Such transfer may be manifested by the clear exercise of attributes of ownership over such stocks by the transferee,or by an actual entry "For a sale or exchange to be taxable, there must be an actual or

notarial acknowledgment to the Deed of Declaration of Trust is subject to DST imposed under Section 185 of the Tax Code, as amended. 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. However, the conveyance to the new trustee of the beneficial ownership of any right, claim or interest over THEREFORE, the herein transfer cannot be subject to DST as there is no transfer or

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appointee without the necessary Tax Clearance (TCL) and/or Certificate 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 issue the TCL/CAR as prescribed in Revenue Memorandum Circular (RMC) No. 37-2012. Secretary of the Club to effect the transfer of the MPC share in the name of the Transferee- It is, however, understood that this Ruling shall not serve as authority to the Corporate

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.

Commssioner of Internal Revenue ROME6D.LUMAGUI,JR MM

K-1-MCUS 000386

NOS HAE