At the outset, we should bear in mind that the transfer of shares of stock in a Philippine

corporation is not complete until and unless the BIR issues a Tax Clearance and
Certificate Authorizing Registration (CAR), since the CAR is the document that
authorizes the Corporate Secretary of the company to effect and record the transfer of
ownership of the shares in the Stock and Transfer Book of the corporation. Both the
seller and the buyer of shares should know that the BIR will not issue the Tax Clearance
and CAR until the BIR determines that the correct taxes on the sale have been paid on
the transaction. Lets look at these new rules then.

Sale of shares listed and traded through the local stock exchange
The sale or transfer of shares that are listed and traded through the stock exchange is
subject to a stock transaction tax (STT) of of 1% of the gross selling price. The listed
shares must be sold or traded through the facilities of the stock exchange for the STT to
apply.

Beginning 1 January 2013, however, the STT will not apply to transfer of shares of listed
companies which are not compliant with the minimum public ownership (MPO)
requirement prescribed by the Securities and Exchange Commission or the Philippine
Stock Exchange (PSE). Under Revenue Regulations (RR) No. 16-2012, the sale of listed
shares of noncompliant companies will be subject to the 5%-10% capital gains tax
(CGT).

Sale of shares not traded through the local stock exchange

For sale of shares not traded through the PSE, the CGT applies at the rate of 5% on the
first P100,000 of net gain, plus 10% in excess thereof. The net gain is the difference
between the selling price and the acquisition cost of the shares. The selling price is the
consideration agreed in the sale document, while the acquisition cost includes the
purchase or subscription price plus all other costs of acquisition such as commission,
DST, and transfer fees.

As mentioned earlier, the 5%-10% CGT rates also apply to the sale of listed shares that
are not traded through the PSE, as well as the sale of listed shares of companies who are
not compliant with the MPO requirement.

In case of share transfers by a non-resident, the gain may be exempted from the CGT
under the relevant provisions of the applicable tax treaty, provided a tax treaty relief
application (TTRA) is filed in a timely manner with the BIR. For example, any gain
derived by a resident of the United Kingdom or the Netherlands from the sale of
Philippine company shares is exempt from CGT. On the other hand, any gain derived by
a resident of other countries including Japan, Singapore, and China may also be exempt
from CGT if the assets of the Philippine company whose shares are being sold do not
consist principally of immovable property or if its real property interest does not
exceed 50% of the entire assets of the company in terms of value.
Another important point to bear in mind in share transfers is that if the selling price or
consideration is lower than the fair market value (FMV) of the shares, then, the
difference is deemed a gift subject to donors tax. The donors tax ranges from 2% to 15%
if the transaction is between individual relatives (i.e., brother, sister (whether by whole
or half-blood), spouse, ancestor and lineal descendant, or relative by consanguinity in
the collateral line within the fourth degree of relationship; otherwise, the donors tax
rate is 30%. It is therefore critical to compare the selling price with the FMV of the
shares sold to see if donors tax applies on the sale.

The recently issued RR No. 6-2013, which became effective on April 25, 2013, prescribes
a new rule in determining the FMV of shares which are not listed and traded through
the PSE. Under RR No.6-2013, the FMV of the shares will no longer be necessarily
equivalent to the book value based on the audited financial statements nearest the date
of sale. Instead, the FMV of the shares should now be determined using the Adjusted
Net Asset Method whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the liability values is the indicated value of the equity. If
the company has real property assets, the appraised value shall be whichever is the
highest of:

The FMV as determined by the Commissioner (i.e., zonal value); or

The FMV shown in the Tax Declaration; or
The FMV as determined by an independent appraiser.

With this new regulation, the FMV of shares of stock of corporations is expected to be
higher, particularly for companies with real property assets, as the prescribed valuation
method results in the upward adjustment of the values of real property.

http://www.sgv.ph/share-transfer-transactions-by-jonald-r-vergara-june-24-2013/

SEC Requirements

Here is an overview of the procedure to respect in order to transfer shares in the Philippines:

Two different government entities are involved in this process: The Securities and Exchange
Commission (SEC) and the Bureau of Internal Revenue (BIR).

Before a share can be transferred and be reflected at the General Information Sheet with SEC,
this must first be cleared with BIR that will assess the Documentary Stamp Tax and Capital
Gains Tax to be paid.
A certain number of requirements must be prepared in order to fully process this transfer:

Filing a Deed of Transfer

Audited Financial Statement
Stock certificate and other documents that maybe required depending on the Revenue District
Office

After the clearance with the BIR, you must file the GIS at the SEC to complete the transfer of the
shares. The new shareholder will need to provide the following information:

Complete name
Address
TIN number A foreigner can apply for a one time TIN number with the BIR
Respective share that this new shareholder will hold

All this process will take approximately 8 weeks to be completed. If you are in need of
transferring shares of stock or modifying the shareholding structure, Triple I Consulting can
surely assist you in this time consuming process. Do not hesitate to reach us directly for further
details.

BIR Form No. 2000-OT Documentary Stamp Tax Declaration/Return (One

Time Transactions)
Download
Description
(Zipped Excel) | (PDF)
This return shall be filed in triplicate by the following
person making, signing, issuing, accepting or
transferring the document or facility evidencing
transaction:

1. Every natural or juridical person, resident or non-

resident, for sale, barter, exchange or other onerous
disposition of shares of stock in a domestic corporation,
classified as capital asset, not traded in the local stock
exchange;

2. Every withholding agent/buyer/seller on the sale,

transfer or exchange of real property classified as capital
asset. The "sale" includes pacto de retro sale and other
forms of conditional sale; and
 3. Every withholding agent/buyer/seller on the sale,
transfer or exchange of real property classified as
ordinary asset.

Filing Date

The return shall be filed and the tax paid within (5) days
after the close of the month when the taxable document
was made, signed, issued, accepted or transferred.

BIR Form No. 2000 Documentary Stamps Tax Declaration/ Return

Download Description

(Zipped Excel) | (PDF) This return is filed by the following:

1. In the case of constructive affixture of documentary

stamps, by the person making, signing, issuing,
accepting, or transferring documents, instruments, loan
agreements and papers, acceptances, assignments, sales
and conveyances of the obligation, right or property
incident thereto wherever the document is made, signed,
issued, accepted or transferred when the obligation or
right arises from Philippine sources or the property is
situated in the Philippines at the same time such act is
done or transaction had;

2. by a metering machine user who imprints the

documentary stamp tax due on the taxable document;
and

3. by a revenue collection agent for remittance of sold

loose documentary stamps.Whenever one party to the
taxable document enjoys exemption from the tax herein
imposed, the other party thereto who is not exempt shall
be the one directly liable for the tax.

Filing Date

The return shall be filed within five (5) days after the
close of the month when the taxable document was
made, signed, issued, accepted or transferred or when
reloading a metering machine becomes necessary or
 upon remittance by revenue collection agents of
collection from the sale of loose stamps.

For EFPS Taxpayer

The deadline for eletronically filing and paying the taxes

due thereon shall be in accordance with the provisions of
existing applicable revenue issuances.

How to sell shares of stock

Posted on May 26, 2010 by Hector M. de Leon Jr. Posted in Civil Law, Commercial Law Tagged
corporation, sale

At some point, a stockholder may wish to sell his shares in the corporation. The basic steps in
the process are:

1. Negotiation and execution of the deed of sale;

2. Payment of the capital gains tax/donors tax (if any) and the documentary stamp tax, and the
filing of the appropriate returns with the Bureau of Internal Revenue (BIR);

3. Issuance of the tax clearance certificate/Certificate Authorizing Registration (CAR) by

the BIR;

4. Presentation of the CAR to the Corporate Secretary, the registration by the Corporate
Secretary of the sale in the stock and transfer book of the corporation, the cancellation by the
Corporate Secretary of the stock certificates in the name of the seller and the issuance by the
Corporate Secretary of new stock certificates to the buyer.

Lets discuss each of those steps.

1. The Deed of Sale

The basic Deed of Sale will contain the following:

(a) the name and other personal details (e.g., civil status, citizenship, address, etc.) of the seller
and the buyer;
(b) a description of the shares of stock being sold (including the number of shares sold, the par
value of shares, the class of shares (if applicable) and the relevant stock certificate numbers);

(c) the purchase price for the shares (and terms of payment, if applicable).

The basic Deed of Sale may also include:

(a) representations and warranties of the seller (e.g., that the seller is the legal and beneficial
owner of the shares, that the shares of stock are free from any liens and encumbrances, that the
shares of stock are fully paid and non-assessable, etc.);

(b) provisions on payment of taxes and who will be responsible for obtaining the CAR.

Some notes:

(a) an agent may sign on behalf of a party to the transaction but such agent must be duly
authorized by his principal (through a power of attorney);

(b) if the stock certificate is in the name of a person who holds the shares in trust for the
beneficial owner, the trustee need not be a party to the deed of sale if the trustee has executed a
declaration of trust with a special power of attorney authorizing the beneficial owner to sell the
shares;

(c) legally, the deed of sale need not be notarized but it would be advisable to do so
(particularly so that the risk that the BIR will raise any issue as to when the relevant taxes are
due will be minimized);

(d) upon execution of the deed of sale, the seller should deliver the sellers stock certificates to
the buyer (unless no stock certificates have been issued because the shares have not been fully
paid) so that the Corporate Secretary can subsequently cancel the stock certificates in the name
of the seller and issue new stock certificates in the name of the buyer;

(e) usually, no governmental approvals are required for the sale of shares but there may be
instances when such approvals are required (e.g., the corporation is covered by special laws
regulating ownership of shares in such corporation).

2. Capital gains tax/donors tax and documentary stamp tax.

On the assumption that the stockholder is not a dealer in securities or otherwise exempt from
capital gains tax, the sale of shares in a Philippine corporation will be subject to capital gains
tax/donors tax and documentary stamp tax.

(a) Capital gains tax/donors tax

The sale of shares not listed in the stock exchange and held as a capital asset is subject to a
capital gains tax at the rate of 5% for the first PhP100,000 of gain, and at the rate of 10% for gain
exceeding PhP100,000. This tax is imposed on the seller. If the seller is a resident of a country
that has an income tax treaty with the Philippines, the seller may be able to claim exemption
from capital gains tax. The current position of the BIR is that a person who wishes to claim the
benefits of a tax treaty must file an application for tax treaty relief with the BIR.

To determine the capital gains derived by the seller, the sellers cost basis in the shares as well as
the sellers expenses of sale are deducted from the amount of consideration received by the seller
(see Revenue Regulations No. 6-2008, sec. 7(c.3.1)). In this regard, in case of a cash sale, the
selling price shall be the total consideration per deed of sale (see Revenue Regulations No. 6-
2008, sec. 7(c.1.1). However, under Revenue Regulations No. 6-2008, in case the fair market
value of the shares of stock sold is greater than the amount of money received by the seller, the
excess of the fair market value of the shares of stock sold over the amount of money received as
consideration shall be deemed a gift subject to the donors tax under Section 100 of the Tax Code
(sec. 7(c.1.4)). In other words, in that situation, the transaction will be subject to donors tax.
Thus, there may be situations where a sale transaction will be subject to both capital gains tax
and donors tax, such as when a seller sells shares with a fair market value of PhP1000 at a
selling price of PhP700 when his cost basis in the shares is PhP500. Here, PhP200 (i.e., PhP700
less PhP500) would be subject to capital gains tax while PhP300 (i.e., PhP1000 less PhP700) will
be subject to donors tax.

The imposition of gift tax on the sale of shares under the scenario described above benefits
individuals who are selling shares to their relatives (within the 4th degree of consanguinity), as
these individuals may be able to avail of a rate of tax (ranging from 2% to 8%, depending on the
amount of the gift) lower than the 10% capital gains tax that would have been applicable if the
10% capital gains tax (instead of donors tax) was imposed. On the other hand, persons
(including corporations) who sell to unrelated parties are placed at a disadvantage, as the amount
of the gift will be subject to donors tax at the flat rate of 30%. My personal view is that Section
100 of the Tax Code does not apply to ordinary business transactions where there is
no donative intent (see, e.g., BIR Ruling DA-652-06 dated November 6, 2006).

The capital gains tax return must be filed and any capital gains tax due must be paid within 30
days after each transaction. The seller must also file a consolidated return after the close of the
taxable year. The donors tax return must be filed and the donors tax must also be paid within
30 days after the gift is made.

(b) Documentary stamp tax

The sale of shares is subject to documentary stamp tax of PhP0.75 on each PhP200 of the par
value (not the fair market value) of the shares sold. For shares with no par value,the amount of
the documentary stamp tax payable is twenty-five percent (25%) of the documentary stamp tax
paid upon the original issue of said stock.

The documentary stamp tax can be paid either by the seller or the buyer. Generally, the buyer
shoulders the documentary stamp tax.
The documentary stamp tax return and the documentary stamp tax must be paid not later than the
5th day of the month following the date of the transaction.

3. Certificate Authorizing Registration

After payment of the relevant taxes, the BIR can then issue the CAR, which is then is presented
to the Corporate Secretary to support the request for the registration of the transfer of shares in
the books of the corporation. Section 11 of Revenue Regulations No. 6-2008 provides:

SEC. 11. EFFECT OF NON-PAYMENT OF TAX. No sale, exchange, transfer or similar

transaction intended to convey ownership of, or title to any share of stock shall be registered in
the books of the corporation unless the receipts of payment of the tax herein imposed is filed
with and recorded by the stock transfer agent or secretary of the corporation. It shall be the duty
of the aforesaid persons to inform the Bureau of Internal Revenue in case of non-payment of tax.
Any stock transfer agent or secretary of the corporation or the stockbroker, who caused the
registration of transfer of ownership or title on any share of stock in violation of the
aforementioned requirements shall be punished in accordance with the provisions of Title X,
Chapters I and II of the Tax Code, as amended.

Because the buyer has an interest in seeing to it that the sale of shares is recorded in the books of
the corporation as soon as possible, the buyer would usually wish to be responsible for obtaining
the CAR.

4. Recording of sale and issuance of new stock certificates

The final step in the sale process is the recoding of the transfer of shares in the corporate books,
the cancellation of the stock certificates in the name of the buyer, and the issuance of new stock
certificates in the name of the seller. In this regard, Section 63 of the Corporation Code
provides:

No transfer, however, shall be valid, except as between the parties, until the transfer is recorded
in the books of the corporation so as to show the names of the parties to the transaction, the date
of the transfer, the number of the certificate or certificates and the number of shares transferred.

It must be noted that no shares of stock against which the corporation holds an unpaid claim is
transferable in the books of the corporation (Corporation Code, sec. 63).

https://lexoterica.wordpress.com/2010/05/26/how-to-sell-shares-of-stock/