Percentage tax on certain transactions.
Section 210
SEC. 210. Percentage tax on certain transactions.— (a) Stock transactions.—There shall be levied, assessed, collected, and paid on every sale, exchange, transfer or similar transaction intended to convey ownership of, or title to, any share of stock, a tax equivalent to one-fourth °f one percent of the gross selling price of the share shares of stock sold, or of the gross value in money of the share or shares of stocks, exchanged or transferred, which shall be paid by the seller or transferor. The tax herein imposed shall not apply to: (1) The issuance by a corporation of shares of stock, whether original or additional issues; (2) The donation of any share or shares of stock made to any educational or charitable corporation, institution, foundation, trust or philanthropic organization or research institution or organization as defined in and subject to the conditions imposed by Section 123 of this Code; (3) The exchange of any share or shares of stock effected pursuant to the plan for merger or consolidation under paragraph (2) (b)t Section 35 of this Code; (4) The transfer of shares of stock by testate or intestate succession; and (5) The sale, exchange or transfer of shares acquired before November 5, 1970 in which case the pertinent pro visions of this Code shall apply; Pending the suspension of the effectivity of Section 34 paragraph (g) of this Code by Presidential Decree No. 1116, any capital gain arising from a stock transaction on which the tax herein imposed has been paid shall not be taken into account in computing net capital gain or loss under Section thirty-four of this Code if (1) both the acquisition and the disposition of said stock by the taxpayer are effected after the effectivity of this Code and (2) the sale, exchange, and transfer is bona fide and the consideration for the transaction represents the substantial fair market value of the stock: Provided, That, in case of gain not arising from, but realized out of the said stock transaction, the pertinent provisions of this Code shall apply. However, any capital loss arising from such transaction shall be taken into account in computing net capital gain in accordance with the provisions of this Code: Provided, That there shall be no capital loss carry-over. Notwithstanding the provisions of Section thirty of this Code, the tax imposed in this section shall not be an allowable deduction for income tax purposes. For purposes of this section "fair market value" of shares of stock subject of any transaction in a stock exchange on any particular date will be determined by the actual selling- price of the stock as certified by the stock exchange which handled the transaction. In the case of shares of stock not traded through a stock exchange but listed in one or more stock exchanges the highest closing price of the day on which the shares are transferred shall be the fair market value of the shares. In the absence of any sale, the highest closing price of the day nearest to that day on which the shares are transferred shall be the fair market value of the shares. In all other cases, the fair market value shall be determined by considering the nature and history of the business, book value of the stock, earning and dividend paying capacity of the company, goodwill, and sales of both the stock to be valued and that of companies similarly situated. No sale, exchange, transfer, or similar transaction intended to convey ownership of, or title to, any share or shares of stock which had been acquired on or after November 5, 1970, shall be registered in the books of a corporation, unless the receipt of payment of the tax imposed under this section or a copy thereof, is filed with and recorded by the stock transfer agent or secretary of the corporation. In the case of stocks traded through a stock exchange, it shall be the duty of the stock broker to collect on behalf °f the government the tax due from the seller or transferor upon the issuance of the confirmation of sale. The stock broker shall issue the confirmation of sale for the Account of any transferor or seller of stocks simultaneously upon payment of the tax herein imposed and not otherwise. In the case of stocks not traded through a stock exchange, it shall be the duty of the stock transfer agent or the secretary of the corporation, in case a corporation has no stock transfer agent, to collect on behalf of the government the tax due from the seller or transferor before recording the transfer of stock in the stock and transfer book. The stockbroker, transfer agent, or secretary of the corporation shall issue the corresponding official receipt, which was previously registered with the Bureau of Internal Revenue to the seller or transferor. It shall be the duty of every stock broker to turn over the sums collected by him as tax to the Bureau of Internal Revenue within three banking days from the date of collection thereof; and to submit on Monday of each week to the secretary of the stock exchange of which he is a member, a true and complete return, which shall contain a declaration that he made it under the penalties of perjury, of all transactions effected through him during the preceding week and of the taxes collected by him and turned over to the Bureau of Internal Revenue. The secretary of the stock exchange shall reconcile the same with the weekly reports of stock brokers and in turn transmit to the Bureau of Internal Revenue on the first and sixteenth day of each month a consolidated return of all transactions effected during the preceding period through the stock exchange. It shall likewise be the duty of every stock transfer agent, or secretary of the corporation, as the case may be, to turn over the sums collected by him as taxes under this section to the Bureau of Internal Revenue within three banking days from the date of collection thereof and to file with the Bureau of Internal Revenue on Monday of each week a true and complete return, which shall contain a declaration that he made it under the penalties of perjury, of all taxable transactions effected through him during the preceding week and of all taxes collected by him and turned over to the Bureau of Internal Revenue. (b) Commercial paper transactions.—There shall be levied, assessed, collected and paid on every commercial paper issued in the primary market as principal instrument, a transaction tax equivalent to thirty-five per cent (35%) based on the gross amount of interest thereto as defined hereunder, which shall be paid by the borrower/ issuer: Provided, hoivever, That in the case of a long-term commercial paper whose maturity exceeds one year, the borrower shall pay the tax based on the amount of interest corresponding to one year, and thereafter shall pay the tax upon accrual or actual payment (whichever is earlier) of the untaxed portion of the interest which corresponds to a period not exceeding one year. The transaction tax imposed in this section shall be a final tax to be paid by the borrower and shall be allowed as a deductible item for purposes of computing the borrower's taxable income, For purposes of this tax—- (1) "Commercial paper" shall be defined as an instru ment evidencing indebtedness of any person or entity, in cluding banks and non-banks performing quasi-banking functions, which is issued, endorsed, sold, transferred or in any manner conveyed to another person or entity, either with or without recourse and irrespective of maturity. Principally, commercial papers are promissory notes and/ or similar instruments issued in the primary market and shall not include repurchase agreements, certificates of assignments, certificates of participations, and such other debt instruments issued in the secondary market. (2) The term "interest" shall mean the difference be tween what the principal borrower received and the amount it paid upon maturity of the commercial paper which shall, in no case, be lower than the interest rate prevailing at the time of the issuance or renewal of the commercial paper. Interest shall be deemed synonymous with discount and shall include all fees, commissions, premiums and other payments which form integral parts of the charges imposed as a consequence of the use of money. In all cases, where no interest rate is stated or if the rate stated is lower than the prevailing interest rate at the time of the issuance or renewal of commercial paper, the Commissioner of Internal Revenue, upon consultation with the Monetary Board of the Central Bank of the Philippines, shall adjust the interest rate in accordance herewith, and assess the tax on the basis thereof. The tax herein imposed shall be remitted by the borrower to the Commissioner of Internal Revenue or his Collection Agent in the municipality where such borrower has its principal place of business within five (5) working days from the issuance ot the commercial paper. In the case of long term commercial paper, the tax upon the untaxed portion of the interest which corresponds to a period not exceeding one year shall be paid upon accrual payment, whichever is earlier.