The Bureau of Internal Revenue has in Revenue Regulations 6-2008, consolidated the rules for the imposition of tax upon the sale, barter, exchange or other disposition of shares of domestic companies that are held as capital assets.

Pursuant to the Regulations, the taxes apply to individuals, companies, estates, trusts, trust funds and pension funds, amongst others. However, securities dealers, investors in mutual fund companies who realize gains from redemption of such shares and persons specifically exempt under investment incentives and special laws, are excluded. The Regulations also provide information on the timing of tax payments, the manner of filing returns and the consequences of non-payment of the taxes.

The Regulations mainly cover the application of Philippine taxes for five types of share dispositions:

(a) Sale, Barter or Exchange of Listed and Traded Shares

A stock transaction tax of 0.5% of the gross selling price or money value of the shares disposed of is payable by the seller of the shares.

(b) Sale, Barter, Exchange or Issuance of Shares through Initial Public Offering

Tax of 1% to 4% is imposed on the gross selling price or money value of the shares. The rate of tax depends on the proportion of shares disposed of in relation to the number of shares outstanding.

The tax is payable by the issuer corporation in a primary offering or the selling shareholder in a secondary offering.

(c) Sale, Barter or Exchange of Non-listed and Non-traded Shares

Capital gains tax is imposed on net realized capital gains at the rate of 5% for PHP 100,000 and below, or 10% otherwise.

A capital gain arises where the sales receipts (sum of money received plus fair market value (FMV) of property) exceed the cost (basis or adjusted basis) of the asset, whereas a capital loss arises where the basis/adjusted basis exceeds the amounts realized.

(i) The sales receipts shall be as follows:

-		total consideration per deed of sale in a cash sale;
-		sum of money and FMV of property where the sale consideration consists partly in money and partly in kind; and
-		FMV of property received in the case of exchange

Where the FMV of the shares disposed of is more than the amount of money or FMV of the property received, the excess is deemed to be a gift that is subject to Philippines donor's tax, at prescribed scaled rates.

FMV of listed shares sold outside of the trading system shall be the closing price on the date of sale, or nearest to the date of sale. FMV of non-listed shares is their book value in the audited financial statements nearest to the date of sale.

(ii) The cost basis shall determined as follows:

-		Acquisition by purchase: The basis is the actual purchase price plus all costs of acquisition, such as commissions, documentary stamp taxes, transfer fees, etc. where the shares of stock can be identified. Where the shares of stock cannot be identified, the first-in, first-out method is to be used to compute the basis. If every transaction of a particular stock is recorded by the seller, the moving average method should be used. The basis for a stock dividend is determined by allocating the cost of the original shares of stock to the total number shares held after receipt of stock dividends.
-		Acquisition by devise, bequest or inheritance: The basis is the FMV at the time of death of the decedent.
-		Acquisition by gift: The basis is the same as the donor's and is restricted to the lower of such basis and the FMV of the property at the time of the gift.
-		Acquisition for inadequate consideration: The basis is the amount paid by the transferee. Guidance is also provided on how to determine the substituted basis in tax-free exchanges, and the limitation on the availability of capital losses arising from disposals of such shares.

(d) Surrender of Shares Upon Dissolution and Liquidation of a Company

Regular income tax (currently, 32% for individuals and 35% for corporations) is imposed on the difference between the cash and FMV of the property received and the cost of the investment in the shares. The holding period rule applies to individuals. The percentage of taxable capital gain or deductible capital loss depends on the duration the shares are held.

(e) Shares Redeemed for Cancellation or Retirement

Upon the redemption of preferred shares, regular income tax is imposed on the difference between the amount received at the time of redemption and the cost of the preferred shares.

In the case of share buy-backs:

-		of listed shares, the stock transaction tax mentioned in (a) above applies; and
-		of unlisted shares, the capital gains tax mentioned in (c) above applies.