Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded

Through the Local Stock Exchange

Tax Form
BIR Form 1707 - Capital Gains Tax Return (For Onerous Transfer of Shares of
Stocks Not Traded Through the Local Stock Exchange)
Documentary Requirements
1) One original copy and one photocopy of the Notarized Deed of Sale/
Exchange of shares of stock
2) Photocopy of the Deed of Acquisition or proof of cost/ fair market value of
the stocks at the time of acquisition
3) Photocopy of certificate of shares of stock
4) Photocopy of evidences of expenses related to sale
5) Photocopy of Audited Financial Statements duly certified by an
independent certified public accountant with computation of fair market
value per share at the time of sale.
6) Duly approved Tax Debit Memo, if applicable
Additional requirements may be requested for presentation during audit of
the tax case depending upon existing audit procedures.
Procedures
File the Capital Gains Tax return in triplicate (two copies for the BIR and one
copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue
District where the seller or transferor of stocks is registered. In places where
there are no AAB, the return will be filed directly with the Revenue Collection
Officer or Authorized City or Municipal Treasurer.
One-Time Transaction (ONETT) taxpayers shall mandatorily use the
eBIRForms in filing all of their tax returns. They may opt to submit their tax
returns manually using the eBIRForms Offline Package in the RDO where the
seller or transferor of stocks is registered or electronically through the use of
the Online eBIRForms System. (Sec. 3(2) RR No. 6-2014)
Tax Rates

For Shares of Stocks Not Traded in the Stock Exchange

Not
over
P100,000
- Any amount in excess of P100,000 - 10%

5%

Deadline
Within 30 days after each sale or disposition of shares of stocks or real
property. In case of installment sale, the return shall be filed within 30 days
following the receipt of the first down payment and within 30 days following
the subsequent installment payments. Only one return shall be filed for
multiple transactions within the day.
Annual Capital Gains Tax for Onerous Transfer of Shares of Stocks Not
Traded Through the Local Stock Exchange
Tax Form
BIR Form 1707A - Annual Capital Gains Tax Return (For Onerous Transfer of
Shares of Stocks Not Traded Through the Local Stock Exchange)
Procedures
File the Capital Gains Tax return in triplicate (two copies for the BIR and one
copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue
District where the seller or transferor of stocks is registered. In places where
there are no AAB, the return will be filed directly with the Revenue Collection
Officer or Authorized City or Municipal Treasurer.
Tax Rates
For Shares of Stocks Not Traded in the Stock Exchange
Not
over
P100,000
- Any amount in excess of P100,000 - 10%

5%

Deadline
Individual Taxpayers On or before April 15 of each year covering all stock
transactions of the preceding taxable year
Corporate Taxpayers On or before the fifteenth (15) day of the fourth (4)
month following the close of the taxable year covering all transactions of the
preceding taxable year

Note: For onerous transfer of real property other than capital asset (including
taxable and exempt), a creditable withholding tax based on the gross selling
price/total amount of consideration or the fair market value determined in
accordance with Section 6(E) of the Code, whichever is higher, paid to the
seller/owner for the sale, transfer or exchange of real property, other than
capital asset, shall be imposed upon the withholding agent/buyer. (sec. 3 (j),
RR NO. 6-2001)
What are the rules for the determination of amount and recognition of gain or
loss in the sale, barter, or exchange of shares of stock not traded through the
Local Stock exchange? (Sec 7(c ) of RR 6-2008)
(A.) Determination of Selling Price. In determining the selling price, the
following rules shall apply:
(a.1) In the case of cash sale, the selling price shall be the total
consideration
per
deed
of
sale.
(a.2) If the total consideration of the sale or disposition consists partly in
money and partly in kind, the selling price shall be sum of money and the
fair
market
value
of
the
property
received.
(a.3) In the case of exchange, the selling price shall be the fair market
value
of
the
property
received.
(a.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 sec. 100 of the Tax Code, as
amended.
(B.) Definition of "fair market value" of the Shares of Stock.
(b.1) In the case of listed shares which were sold, transferred or
exchanged outside of the trading system and/or facilities of the Local
Stock Exchange, the closing price on the day when the shares are sold,
transferred, or exchanged. When no sale is made in the Local Stock
Exchange on the day when the Listed shares are sold, transferred, or
exchanged, the closing price on the day nearest to the date of sale, transfer
or exchange of the shares shall be the fair market value. Sec 2 of RR 6-2013
(b.2) In the case of shares 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.
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 valued fixed by
the Provincial
and
City
Assessors,
or
(3) The fair market value as determined by Independent Appraiser.
(b.3) In the case of a unit of participation in any association, recreation or
amusement club (such as golf, polo, or similar clubs), the fair market
value thereof shall be its selling price or the bid price nearest published in
any newspaper or publication of general circulation, whichever is higher.
(C.) Determination of Gain or Loss from Sale or Disposition of Shares of Stock.
The gain from the sale or other disposition Stock. The gain from the sale
or other disposition of shares of stock shall be the excess of the amount
realized therefrom over the basis or adjusted basis for determining gain, and
the loss shall be the excess of the basis or adjusted basis for determining loss
over the amount realized. The amount realized from the sale or other
disposition of property shall be the sum of money received plus the fair
market value of the property (other than money) received, if any.
How do we determine the fair market value of shares of stocks not traded
through the Local Stock Exchange?
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 adjusted liability value is the indicated
value of the equity.
For purposes of this item, the appraised value of real property at the time of
sale shall be the highest among the following:
(a) The fair market value as determined by the Commissioner, or
(b) The fair market value as shown in the schedule of values fixed by the
Provincial and City Assessors, or

(c) The fair market value as determined by Independent Appraiser. (RR

NO. 6-2013)