BIR Ruling No. 440-2022

BUREAU OF INTERNALREVENUE REPUBLICOF THE PHILIPPINES DEPARTMENT OF FINANCE

26th Street corner 11th Avenue,BGC,Taguig City Unit 1908, Tower 2 High Street Corporate Plaza LEAGOGOLAW OFFICE Secs.24 (C); 98; 175 of the Tax Code of 1997,as amended BIR Ruling No. OT-338-2021; BIR Ruling No.OT-467-2021 RR No. 13-2004 BIR Ruling No.OT-421-2021 OT-4402022 DEC0 9 2022

Attention: Atty. Jose Lis C. Leagogo Atty. McDonald Abalos Atty. Pola Lia Celina L. Lamarca Gentlemen:

to another trustee is not subject to capital gains tax (CGT), donor's tax and documentary stamp SHANGHAI BANKING CORPORATION LIMiTED(theHSBC),for confirmation that the change of trustee of the Manila Polo Club Inc.(MPCI Membership share from one trustee tax (DST) This refers to your request on behalf of your client. THE HONG KONG AND

Background:

in the Philippines through its Philippine Branch. HSBC is a corporation duly registered in Hong Kong and is authorized to do business

the "Club) covered by Proprietary Membership Certificate No. 6730. HSBC purchased a proprietary share in Manila Polo Club Inc.Manila Polo Clubor

admitted as proprietary members, to wit Under Article 7(c) of the Club's Articles of Incorporation, only natural persons shall be

"c Only natural persons shall be admitted as proprietary members.No person shall be entitled to own more than one proprietary membership certificate."

may be owned by a corporation. if the intention is to limit its application to natural persons. second sentence of Article 7c uses the word person in the generic sense, and therefore includes corporations. the Articles of Incorporation should have stated so. With respect to owning the certificate, the Membership Certificate itself may be owned by a corporate entity. As could be gleaned in only to natural persons, but as regards ownership of the proprietary membership certificate, it Article 7( above, admission to be a member and enjoy the facilities of the Club is limited Though only natural persons are admitted as proprietary members, the Proprietary

the sole purpose that he or she may enjoy the facilities and amenities of MPCI while he or she works at HSBC. Ownership of the MPCI Share, however, remains with HSBC. Membership share in Manila Polo Club MPCI Share to a senior executive trusteefor Since only natural persons can enjoy the facilities, HSBC assigns the proprietary

Sections 24(C); 175; RR No. 13-2004 HSBC-Transfer of Club Shares from one Assignee to Another CT-440-2022 DEC 0 9 2022

forms part of HSBC's assets and is recorded in its book account. Thus, HSBC maintains the beneficial ownership over the MPCI Share as the same

con firming that there is no transfer of beneficial ownership of the MPCI Share. In the Declaration of Trust, it is shown that: On the other hand, the trustee executes a Declaration of Trust in favor of HSBC

c The transfer is for the sole purpose of making the senior executive b) Only legal ownership over the proprietary membership certificate is e d a) HSBC has purchased a proprietary share of Manila Polo Club, Inc.; No consideration was paid for the transfer of the MPCI Share to the senior The senior executive has no title,right, claim or interest whatsoever in the MPCI Share remains with HSBC; qualified to avail of the use of the facilities of Manila Polo Club, Inc,; MPCI Share and the replacement certificate that will be issued; transferred to the senior executive while the beneficial ownership of the

executive.

presented every time the trustee uses the facilities of Manila Polo Club. Membership Certificate is issued by Manila Polo Club in the name of the trustee, upon submitting a copy of the Declaration of Trust. The trustee is then issued a card, which is In order for the trustee to enjoy the facilities of Manila Polo Club, a Proprietary

executed on February 8,2013. under the name of Ms. Ma. Theresa V. Garcia, pursuant to a Declaration of Trust that she The MPCI Share covered by Proprietary Membership Certificate No.6730 currently

Proprietary Certificate No.6730. Officer, executed a Declaration of Trust in favor of HSBC for the MPCI Share covered by On August 3, 2022, Mr. Sandeep Uppal, HSBC's President and Chief Executive

issued in his favor. however, has not yet been issued to him until a ruling from the Bureau of Internal Revenue is current trustee for the MPCI Share.A replacement proprietary membership certificate Pursuant to the Declaration of Trust dated August 3, 2022, Mr. Sandeep Uppal is the

We reply, as follows:

to Mr. Sandeep Uppal is not subject to CGT and DST. The transfer of MPCI Share from Ms. Ma.Theresa V.Garcia

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

pertaining to HSBC.Here,the trustor HSBC while the trustee is Mr.Sandeep Uppal expressly disallowed by ACC's By-Laws to acquire and register the club share under its name, the transfer did not give him any kind of right, claim or interest whatsoever in the MPCI Share and that he is holding only the legal ownership of the same with the beneficial ownership Aclub share in Alabang Country ClubACC) in 1987,but being a corporation which was In the case of Sime Darby Pilipinas, Inc. v. Mendoza2, Sime Darby acquired a Class In the Declaration of Trust which Mr. Sandeep Uppal executed, he acknowledged that

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

HSBC-Transfer of Club Shares from one Assignee to Another Sections 24(C); 175; RR No. 13-2004 3 GT-440-2022 DEC 0.9 2022

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 privileges while employed with the company.

neither monetary consideration nor change in beneficial ownership. of the MPCI Share from Ms.Ma.Theresa V.Garcia (old trustee-appointee to its new trustee appointee, Mr. Sandeep Uppal, is not subject to CGT considering that the transfer involves thereto to its 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 MPC, only natural persons may become registered members.Thus, the transfer of the legal title In the instant case, HSBC purchased the MPCI Share and intends to give legal title

The Transfer is not subject to DST

amended. The rule is that the assignment of shares of stock of a domestic corporation is subject 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. 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. Section 4 of RR No. 13-2004 provides, to wit: Revenue Regulations (RR) No. 13-2004 dated December 23, 2004, implementing the

underscoring supplied) to the DST 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 trustee to a newly appointed trustee such certificate of stock remains in the name 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 beneficial ownership in any form of registry including those of a duly authorized Exchange. However, if by the transfer of certificates of stock from a resigned 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, attributes of ownership over such stocks by the transferee, or by an actual entry of a change in the name appearing in the certificate of stock or in the Stock and scripless registry, such as those maintained for or by the Philippine 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 Transfer Book of the issuing corporation or by any entry indicating transfer of "For a sale or exchange to be taxable, there must be an actual or

conveyance to Mr. Sandeep Uppal of the beneficial ownership of or any right,claim or interest of in this case, there is no new exercise of a privilege upon which DST may be imposed. over the MPCI Share or over the assets of MPCI. There being no new conveyance to speak In view thereof, the herein transfer cannot be subject to DST as there are no transfer or

3 RR 13-2004.

Sections 24(C): 175: RR No. 13-2004 HSBC-Transfer of Club Shares from one Assignee to Another D Of40-2022 DEC 0 9 2022

The Transfer is not subject to Donor's Tax

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: (l) the reduction of the patrimony of the

of Mr. Sandeep Uppal.Thus, the transfer of the MPCI Share from one nominee to another shall not be subject to donor's tax under Section 98 of the Tax Code of 1997, as amended. Clearly, there is no intention on the part of HSBC to donate the MPCI Share in favor

considered null and void if upon investigation, it will be disclosed that the facts are different, then this ruling shall be This ruling is being issued on the basis of the foregoing facts as represented. However

Very truly yours,

Compmssioner of Internal Revenue ROMEOD.LUMAGUI,JR 000391

gps(HSBC) K-1