RR No. 16-2012: Prescribes the tax treatment of sales, barters, exchanges or other dispositions of shares of stock of publicly-listed companies whose public ownership levels fall below the mandatory Minimum Public Ownership level, monitoring of these companies and their stock transactions, and amending Revenue Regulations No. 06-08 for the purpose

Summary

RR No. 16-2012 prescribes the tax treatment of sales of shares of publicly-listed companies below the Minimum Public Ownership (MPO) level, and provides for monitoring of these companies. It amends RR No. 06-08.

Key points

1. MPO requirement and grace period. Listed companies must keep a public float of the higher rate of 10% of issued and outstanding shares, excluding treasury shares, or the percentage the SEC or PSE prescribes. Companies non-compliant as of December 31, 2011, or falling below before December 31, 2012, may have until December 31, 2012 to comply.
2. Taxes on transactions. For transactions up to December 31, 2012, the stock transaction tax of 1/2 of 1% of gross selling price under Section 127(A) applies. For transactions after December 31, 2012, a final tax of 5% or 10% on net capital gains applies, and Documentary Stamp Tax (DST) also applies.
3. Not covered. The taxes do not apply to dealers in securities, who pay VAT on gross receipts and Income Tax on sales of securities. They also do not apply to mutual fund investors on redemption gains under Section 32(B)(7)(h), or to persons exempt under investment incentives and special laws.
4. Registration of transfers. DST under Section 175 applies on transfers. No transfer is recorded in the corporation’s books unless the tax receipts and the Certificate Authorizing Registration (CAR) and/or Tax Clearance Certificate are filed with the stock transfer agent or secretary.
5. Reports and penalties. Lists and reports go to the BIR National Office through the Assistant Commissioner, Large Taxpayers Service. Stock transfer agents, secretaries, stockbrokers who register transfers without the receipts, and responsible officers who fail to submit reports are punished under Title X, Chapters I and II of the NIRC, as amended.

Who is affected

• Publicly-listed companies below the MPO level
• Sellers and buyers of their shares
• Stock transfer agents, corporate secretaries and stockbrokers

Deadlines and effectivity

• MPO compliance grace period: until December 31, 2012
• Stock transaction tax applies to transactions up to December 31, 2012
• Final tax on net capital gains applies to transactions after December 31, 2012

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