Beruflich Dokumente
Kultur Dokumente
party buyer, or to UHGI, should the latter decide to exercise its right of first refusal.
Thus, a financial adviser, Deutsche Bank A.G., was engaged to invite interested
potential bidders and to manage the bidding process.
A number of companies expressed interest in bidding for the Sale Shares. A
competitive bidding process ensued in which each of the participants conducted
comprehensive legal and financial due diligence audits of PhilamCare. After the
conclusion of the due diligence process and the tender of bids, STI emerged as the
winning bidder, with the highest indicative bid offer. This bid was made on the basis
of the winning bidder's assessment of the true value of the PhilamCare shares taking
into account its evaluation of PhilamCare's assets and liabilities, as well as the
business outlook.
UHGI opted not to exercise its right of first refusal, and Philamlife concluded
the sale of its 498,590 Class A shares to STI for USD2,190,000.00 (or
Php104,259,330.00 based on the prevailing exchange rate of Php47.607 to USD1.00)
on 24 September 2009. The selling price of the Sale Shares was lower than their book
value based on the financial statements of PhilamCare as of end-2008. The necessary
stamp tax and capital gains tax returns were filed within the periods provided under
the Tax Code.
On the basis of the above, you now seek confirmation that the difference
between the book value of the Sale Shares sold by Philamlife to STI and their selling
price is not a taxable donation under Section 99 (B), in relation to Section 100 of the
Tax Code.
AaSCTD
In reply, please be informed that Section 99 (B) of the Tax Code imposes a
30% donor's tax on gifts made to a stranger including a corporation. The tax is
payable on gratuitous transfers and on transfers with insufficient consideration.
Relative thereto, Section 100 of the Tax Code provides that:
"SEC. 100. Transfer for Less Than Adequate and Full Consideration.
Where property, other than real property referred to in Section 24(D), is
transferred for less than an adequate and full consideration in money or money's
worth, then the amount by which the fair market value of the property exceeded
the value of the consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, and shall be included in computing the amount of
gifts made during the calendar year."
Based on the above, where property is transferred for less than an adequate and
Copyright 2015
full consideration in money or money's worth, the amount by which the fair market
value of the property exceeded the value of the consideration shall be considered a gift
subject to the donor's tax.
Section 100 of the Tax Code is implemented by Revenue Regulations (RR)
6-2008 insofar as the property involved is shares of stocks. Section 7 (c) (c.1) (c.1.4)
of the Regulations provides as follows:
"(c) Determination of Amount and Recognition of Gain or Loss.
(c.1) In the case of cash sale, the selling price shall be the consideration
per deed of sale.
xxx
xxx
xxx
(c.1.4)
In case the fair market value of the shares of stock sold,
bartered, or exchanged is greater than the amount of money and/or fair market
value of the property received, the excess of the fair market value of the shares
of stock sold, bartered or exchanged over the amount of money and the fair
market value of the property, if any, received as consideration shall be deemed a
gift subject to the donor's tax under Section 100 of the Tax Code, as amended."
xxx
xxx
(c.2.2)
In the case of shares of stock not listed and traded in the
local stock exchanges, the book value of the shares of stock as shown in the
financial statements duly certified by an independent certified public accountant
nearest to the date of sale shall be the fair market value."
Based on the above provisions, in case the consideration of the sale of shares of
stock not listed and traded through the local stock exchange is lower than the fair
market value (FMV)/book value of the shares, the difference between the book value
and the selling price of the shares is considered a gift subject to donor's tax under
Section 100 of the Tax Code.
Corollary to this is Revenue Memorandum Circular (RMC) No. 25-2011, dated
March 2, 2011, in which, this Office revoked BIR Ruling No. [DA-(DT-065) 715-09]
Copyright 2015
dated November 27, 2009 for lack of factual and legal basis and clarified that Section
100 of the Tax Code does not mention any exemption. The RMC, thus, provides:
"It is noteworthy to state that the above provision (Section 100 of the
Tax Code) does not mention of any exempt transactions. The above provision is
clear and free from any doubt and/or ambiguity. Hence, there is no room for
interpretation. There is only room for application. (Cebu Portland Cement Co.
vs. Municipality of Naga, Cebu, et al., G.R. No. 24116-17, August 22, 1968)
In City of Iloilo, et al. vs. Smart Communications, Inc. G.R. No. 167260,
February 27, 2009, the Supreme Court held that:
SHADcT
In view of the foregoing, this Office hereby rules that the difference between
the book value and the selling price of the Sale Shares is a taxable donation subject to
the 30% donor's tax under Section 99 (B) of the Tax Code, in relation to Section 100
of the same Code.
Copyright 2015