RMC No. 43-2005: Prescribes the guidelines on the proper treatment of shares of stock disposed of in the Stock Exchange

Summary

RMC No. 43-2005 prescribes guidelines on the proper tax treatment of shares of stock disposed of in the Stock Exchange.

Key points

1. Exchange-traded shares. Under Section 127 of the Tax Code of 1997, sale or disposition of shares is taxed at 1/2 of 1% of gross selling price or gross value in money if the shares are listed and traded through the exchange.
2. Shares not sold through the exchange. A final tax of either 5% or 10% applies to net capital gains under Section 24(C), Section 25(A)(3), Section 25(B), Section 27(D)(2), Section 28(A)(7)(c) and Section 28(B)(5)(c).
3. Prearranged sales. A sale where the sale is prearranged or the buyer or buyers are predetermined is taxed under those same provisions, even if the transaction went through the Exchange or its facility.
4. Transactions excluding the public. Any transaction that in effect excludes the public by any means from taking part in the trading is taxed under those provisions.

Who is affected

• Sellers of shares of stock

Deadlines and effectivity

• Issued September 5, 2005

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.