BIR Ruling No. 435-2022

REPUBLICOF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

National Office Building Quezon City

Secs.24(C;98;175 of theTax Code of 1997, as amended; BIR Ruling No. OT-338-2021; BIR Ruling No. OT-421-2021 BIR Ruling No.OT-467-2021 RR No. 13-2004

OT-.435-2022 NOV 2 2 D2

UNIONBANK & Sapphire Roads, Ortigas Center UnionBank Plaza Meralco Avenue cor. Onyx Pasig City

Attention: Atty. Menchie Monsod Tormon VP - Head of Tax and Insurance

Gentlemen:

owned Manila Polo Ciub (Club share from one nominee to another is exempt from payment This refers to your request for confirmation that the transfer of UnionBank ("Bank)-

of taxes.

Background:

the Club having paid valuable consideration to purchase the same from the Club for the The Bank is the true and beneficial owner of one () proprietary membership share in

exclusive use of its designated corporate officer. The proprietary share is recorded as an asset in its books as of December 31,2018.

Inasmuch as the Club's Articles of Incorporation and By-Laws provide that pnly natural persons shall be admitted as shareholders, the subject share was registered in the name of Mr. Eugene Acevedo under proprietary membership certificate no. Bank remained the true and beneficial owner thereof. Since Mir. Acevedo is no longer connected with the Bank, the Bank transferred the Share to its new nominee, Ms.Mary Joyce transferred to the new nominee and the Bank will remain as the true and beneficial owner. Gonzalez. There was no consideration involved in the transfer and only the legal title was Sharealthough the

the nameof Eugene S. Acevedo,pursuant to a Declaration of Trust that he executed on December 6, 2012. The Share covered by Proprietary Membership Certificate No. is curtently under

On August 15,2022,Ms. Mary Joyce S. Gonzalez, as the Executive Vice-President of the Bank,executed a Declaration of Trust in favor of the Bank for the Sharecovered by Proprietary Certificate No.

Ms. Mary Joyce S. Gonzalez until a ruling from the Bureau of Internal Revenueis issued in her favor. A replacement proprietary membership certificate,however,has not yet been issued to

Sections 24(C):175:RR No.13-2004 Unionbank-Transfer of Club Shares from one Assignee to Another 435-2022 NOV 2 2 2022 2

We reply, as follows:

to Ms. Mary Joyce S. Gonzalez is not subject to CGT. The transfer of the Share from Mr. Eugene S. Acevedo

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

in the Share and thatshe is holding only the legal ownership of the same with the beneficial Joyce S. Gonzalez. ownership pertaining to the Bank.Here, the trustor is the Bank while the trusteeis Ms Mary acknowledged that the transfer did not give her any kind of right, claim or interest whatsoever In the Declaration of Trust which Ms. Mary Joyce S. Gonzalez executed, she

registered the share under the name of respondent Mendoza, Sime Darby's sales 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 facilities and expresslydisallowed by ACC's By-Laws to acquire and register the club share under its name, "A"club share in Alabang Country ClubACC) in 1987,but being a corporation which was privileges while employed with the company. In the case of Sime Darby Pilipinas, Inc. v. Mendoza2, Sime Darby acquired a Class

trustee-appointee, which title entitles the trustee-appointee only to the use and enjoyment of the club's facilities since, under the Articles of Incorporation and By-laws of the Club, only In the instant case, the Bank purchased the Share and gave the legal title thereto to its

monetaryconsideration nor change in beneficial ownership. (BIR Ruling No. QT-467-2021 natural persons may become registered members. Thus, the transfer of the legal titleof the Share from Mr. Eugene S. Acevedo (old trustee-appointee) to its new trustee-appointee, Ms Mary Joyce S. Gonzalez, is not subject to CGT under Section 24(C of the National Internal Revenue Code (Tax Code) of 1997, as amended, considering that the transfer invblves neither dated December 14, 2021)

The Transfer is not subject to DST

to DST upon execution of the deed transferring ownership or rights thereto, or upon deliver. assignment or indorsement of such shares in favor of another. amended The rule is that the assignment of shares of stock of a domestic corporation is subject The transfer is not subject to DST under Section 175 of the Tax Code of 1997, as

provisions of Republic Act (RA) No. 9243, otherwise known as An Act Rationalizing Further the Structure and Administration of the Documentary Stamp Tax3 qualified this rule by stating that for a sale or exchange to be taxable, there must be an actual or constructive transfer of beneficial ownership of the shares of stock from one person to another. Section4 of RR No. 13-2004 provides, to wit: Revenue Regulations (RR) No. 13-2004 dated December 23, 2004, implementing the

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 actualentry "For a sale or exchange to be taxable, there must be an actual or

2 G.R. No. 202247, 19 June 2013. Resurreccion de Leon, et al. v.Emiliano Molo-Peckson, et al., G.R.No. L-17809,29 December 1962. 3 RR 13-2004

Sections 24(C); 175; RR No. 13-2004 Unionbank-Transfer of Club Shares from one Assignee to Another 3 -.435-2022 NOV 2 2 2022

to theDST provided herein only upon proof of a duly executed Nominee 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 underscoring supplied) 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 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 Agreement showing the purpose of the transfer; that the transfer is without of a change in the name appearing in the certificate of stock or in the Stock and beneficial ownership in any form of registry including those of a duly authorized scripless registry, such as those maintained for or by the Philippine Stock Exchange. However, if by the transfer of certificates of stock from a resigned trustee to a newly appointed trustee such certificate of stock remains in the name Transfer Book of the issuing corporation or by any entry indicating transfer bf

to speak of in this case, there is no new exercise of a privilege upon which DST maybe or conveyance to Ms. Mary Joyce S. Gonzalez of the beneficial ownership of or any right, claim or interest over the Share or over the assets of the Bank. There being no new conveyance imposed. In view thereof, the herein transfer cannot be subject to DST as there was no transfer

The Transfer is not subject to Donor's Tax

if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Mary Joyce S. Gonzalez. Thus, the transfer of the Share from one nominee to anothershall hot be subject to donor's tax under Section 98 of the Tax Code of 1997, as amended. donor, (2) the increase in the patrimony of the donee, and (3) the intent to do an act of liberality. The essential elements of a valid donation are: (1) the reduction of the patrimony of the This ruling is being issued on the basis of the foregoing facts as represented. However, Clearly, there is no intention on the part of the Bank to donate the Share in favor of Ms.

Very truly yours,

oykmissioner of Internal Revenue UI,JR

000016

K-1 gps(union bank)