RR No. 6-2008: Consolidates the regulations prescribing the rules on the taxation of sale, barter, exchange or other disposition of shares of stock held as capital assets

Summary

RR No. 6-2008 consolidates the rules on taxing the sale, barter, exchange or other disposition of shares of stock held as capital assets, whether traded through the Local Stock Exchange (LSE), sold through an Initial Public Offering (IPO), or not traded through the LSE.

Key points

1. Who is covered and exempt. Sellers or transferors include individuals (citizen or alien), corporations (domestic or foreign), and others such as estates, trusts and pension funds. Dealers in securities, mutual fund investors on redemption gains, and persons exempt under investment incentives and special laws are exempt.
2. Tax on LSE-traded shares. A stock transaction tax of one-half of one percent (1/2 of 1%) applies to the gross selling price or gross value in money. The seller pays it through the seller’s broker.
3. Tax on IPO shares. For closely held corporations, the rate is 4% for up to 25% of outstanding shares sold, 2% for over 25% but not over 33 1/3%, and 1% for over 33 1/3%. The issuer pays on the Primary Offering and selling shareholders pay on the Secondary Offering.
4. Tax on shares not traded through the LSE. A final tax applies to net capital gains: 5% on gains not over P 100,000 and 10% on any amount in excess of P 100,000. The regulations also set rules for selling price, fair market value, cost basis, substituted basis, capital losses and wash sales (61-day period).
5. Filing and collection. For LSE-traded shares, the broker collects the tax and remits it to the RDO within 5 banking days. For IPOs, the issuer files within 30 days from listing. For shares not traded through the LSE, a return is due within 30 days after each transaction and a final consolidated return on or before the 15th day of the 4th month after year end.
6. Registration and penalties. A transfer is not registered in the corporation’s books unless proof of tax payment is filed with the stock transfer agent or secretary. Penalties include 25% of the amount due in listed cases, 50% for willful neglect or false returns, and interest at 20% per annum.

Who is affected

• Individual, corporate and other sellers or transferors of shares of stock
• Stock brokers
• Stock transfer agents and corporate secretaries

Deadlines and effectivity

• Return for non-LSE sales: within 30 days after each transaction
• Final consolidated return: on or before the 15th day of the 4th month following the close of the taxable year
• IPO tax: within 30 days from the date of listing
• Broker remittance: within 5 banking days from collection

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