RR No. 20-2020 — Amends certain provisions of RR No. 06-2008 (Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock held as Capital Assets) (Published in Malaya Business Insight on August 19, 2020)

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

AUG 0 3 2020 REVENUE REGULATIONS NO._ 20- 2020

SUBJECT: Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter. Amending Certain Provisions of Revenue Regulations No. 06-2008 entitled Exchange or Other Disposition of Shares of Stock held as Capital Assets

TO: All Revenue Officials. Employees. and Others Concerned.

28(AX(7)(c). 28(B)(5)(c) of the Tax Code. these Regulations are hereby promulgated to amend certain SECTION 1. Scope. -- Pursuant to the provisions of Section 244 of the National Internal Revenue (ode of 1997 (Tax Code). as amended. in relation to Sections 24(C). 25(A)(3), 25(B). 27(DX2) imposition of tax for the sale. barter. exchange or other disposition of shares of stock not traded through the Local Stock Exchange provisions of Revenue Regulations (RR) No. 6-2013* in relation to RR No. 6-2008. relative to the

SECTION 2. Amendment. -- Section 7 of RR No. 06-2008. as amended hy RR No. 6-2013. is herchy amended to read as follows:

Stock Exchange Pursuant to Secs.24(C) 25(A(3).25(B).27(D)(2).28(A)(7)(C).28(B) (S) (C) of The Tax Code. as Amended. "SEC. ?. Sale. Barter or Exchange of Shates of Stock Not Traded Through a Local

XX XXX XXX

this Section. "fair market value" of the shares of stock soid shall be: {c.2} Definition of "fair market value" of the Shares of Stock. For purposes of

Ic.2.1

exchanges. the following rules shall apply: (c.2.2) in the case of shares of stock not listed and traded in the local stock

I) For common shares of stock. the book value based on the latest avaitable financial

sale. but not earlier than the immediately preceding taxable year. shall be statements doly certified by an independent public accountant prior to the date ot onsidered as the prima facie fair.market value

2) For preferred shares of stock. the liquidation value. which is equal to the transaction date. including any premium and cumulative preferred dividends in arrears. shall be considered as fair market vatue. redemption price of the preferred shares as of balance sheet date nearest to the

3) In case there are both common and preferred shares. the book value per common the total equity of the corporation and dividing the resut by the"number of share is computed by deducting the jiquidation value of the preferred shares from

BUREAU OF INTERNAT REVENUE

AUG 17 2020 Q

1:00.00 GCGT RECORDS MGT. DIVISION

outstanding common shares as of balancc sheet date nearest to the transaction date.

the book value as the fair market value of the shares of stock in X Corporation shall be determined based on its audited financial statements for year ending Illustration: Assome that Mr. A sold 10.000 shares in X Corporation on June 30 2020. The corporation's accounting period is on n calendar year basis. In this case. December 31. 2019. since the audited financial statements for taxable year 2020 is not yet existent as of the date of the sale of shares

are 200.000. For this purpose. the net book vatue as the fair market value of each Assume furthet that based on the audited financial statements as of December 31 Php20.000.000 resulting to an equity of Php30.000.000. Its outstanding shares 2019. the total assets of X Corporation are Php50.000.000 while its liabitities are share call be computed as follows:

200.000 (outstanding shares 30.000.000.(equity)

* + 50 (net book 'value per share)

its latest audited financial services shall be Phpt50 per share. As such. the fair market valte of the shares of stocks in X Corporation shall be Php150 per share. In this case- the net book value of the shares of'stock in X Corporation based on

4) For this purpose, the book value of the common shares of stock or the liquidation value of the preferred shares of stock. need not be adjusted to include any sufficient in determining the fair market value of the shares of stock subject of the sate. barter. exchange. or other disposition. appraisal surplus from any property.of the corporation not reflected or included in the latest audited financiat statements. in order to determine the fair market value of the shares of stock. The latest audited financial statements shall be

KXX XXX XXX**

SECTION 3. Repealing Clause. -- All revenue issuances or parts thereof inconsistent with the provisions of these Regulations are hereby considered repealed. amended or modified according!y

pubtication in the Officiat Gazettc or in a newspaper of general circulation. SECTION 4; Effcctivitv. These regulations shall be effective after 15 days tollowing its

CARLOS G. DOM Secretary of Finance

Recommending Approvat: AUG 0 7 2020

Commissioner of Internal Revenue teesoa CAESAR R. DULAy 036187 BUREAU OF JNTSRNAL REVENUE RECORDS MGT. DIVISION OU AUG 17 2020 l: 00.PnV C