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Tuesday, May 16, 2006
Tax notes: Transfer of shares to a global corporation
Under a legitimate worldwide corporate reorganization, transfer of shares of stock in a Philippine company by a nonresident foreign corporation to another nonresident foreign corporation belonging to the same group of companies shall be exempt from capital gains tax.
Since there is no transfer of beneficial ownership of the shares, no gain will be realized by both the transferor and the transferee (Bureau of Internal Revenue Ruling DA-524-05, Dec. 29, 2005).
However, the transfer of shares shall be subject to documentary stamp tax (DST) under Section 176 of the Tax Code.
The DST is due upon execution of the deed transferring ownership of the rights or upon delivery, assignment or endorsement of such shares in favor of the other.
The transfer shall not be recorded unless the DST has been paid. (Source: Punongbayan & Araullo)
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