Value of Shares of Stock at the Time of Sale Not Listed and Traded in the Local Stock Exchanges and Requirements in Compliance for the Issuance of Certificate Authorizing Registration (CAR) from the BIR

Last April 11, 2013, the bureau has issued Revenue Regulations No. 06-2013 amending Certain Provision of Revenue Regulations No. 06-2008 Entitled Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock Held as Capital Assets.

Under Section 2 of these Regulations as amended, Section 7 of RR No. 06-2008, (c.2.2) In the case of share of stock not listed and traded in the local stock exchanges, the value of the shares of stock at the time of sale shall be the fair market value. In determining the value of the shares, the Adjusted Net Asset Method shall be used whereby all assets and liabilities are adjusted to fair market values. The net of adjusted asset minus the liability values is the indicated value of the equity. For the purposes of this section, the appraised value of real property at the time of sale shall be the higher of - 

1. The fair market value as determined by the Commissioner, or 

2. The fair market value as shown in the schedule of value fixed by the Provincial and City Assessors, or

3. The fair market value as determined by Independent Appraiser.

Illustrations:

For the purpose in securing a Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue (BIR) with regards to Onerous Transfer of Shares of Stock Not Traded Through the Local Stock Exchange, the taxpayer should comply the requirements and pay related taxes and fees as follows:

1. Certification Fee (BIR Form 0605); 

2. Documentary Stamp Tax (BIR Form 2000-OT); - Deadline is within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred.

3. Capital Gains Tax (if any but still required to file BIR Form 1707 showing the computation) - Deadline is within thirty (30) days after each sale, barter, exchange or other disposition of shares of stock not traded through the local stock exchange;

4. Donors Tax (if the Fair Market Value of the Shares Sold is lower than the Adjusted Book Value of the Issuing Corporation which will result a deemed donated transactions)

The Adjusted Book Value of the Issuing Corporation is computed as Adjusted Book Value Per Share Multiply by Cost of the Shares of Stocks Sold. The Adjusted Book Value Per Share is computed as Total Adjusted Net Asset (please refer to the illustrations) Divided by Issued and Outstanding Shares (Issued Shares Less Treasury Shares).

If the Adjusted Book Value is greater than the Cost of the Shares of Stocks Sold, then there's Net Capital Gain which is subject to Capital Gains Tax (Tax Due is 5% on the first 100,000; 10% over 100,000). 

The Documentary Stamp Tax is computed as Total Par Value (Cost of Shares of Stock(s) Sold) Divided by P200.00 Multiply by P1.50 for every P200.00 or a fraction thereof.

If the Adjusted Book Value of the Issuing Corporation is greater than the Cost of the Shares Sold, it is considered as a deemed donation transactions which is subject to Donors Tax as a Stranger computed as Adjusted Book Value of the Issuing Corporation Less Fair Market Value of the Shares Sold Multiply by 30%.

Please refer ftp://ftp.bir.gov.ph/webadmin1/pdf/70201RR%206-2013.pdf of the full text RR Nos. 6-2013.