I.

Additional subscription by way of shares of stock

SEC Matters: Requirements

1. Detailed schedule of the shares of stock showing the name of stockholder, stock certificate
number, number of shares and the basis of transfer value whether market or book value
certified by the treasurer
2. Audited financial statements of the investee company as of the last fiscal year stamped
received by BIR and SEC
3. Deed of Assignment
4. Certification by the Corporate Secretary of the investee company that the shares of stock are
outstanding in the name of assignor
5. Photocopy of the stock certificate (present original for verification)
6. Latest market quotation in newspaper or certification from stock exchange/broker as to
latest market price of the shares of stock (if listed in the Stock Exchange)
7. Affidavit of Undertaking by an incorporator of the corporation to submit the required proof
of transfer within the prescribed period

II. Additional subscription by way of Inventories/Furniture/Personal Properties

1. Detailed schedule of the property showing the description and transfer value certified by
the treasurer
2. Deed of Assignment

BIR Matters: Documentary Stamp Tax

Tax Document Taxable Unit Tax Due Per Unit % of Taxable Base
Code Unit
Sectio
n
174   Original P200.00 or fraction 2.00                           1%  Par value of shares of stocks        
Issue of thereof                               Actual consideration for the
Shares of   2.00   issuance of shares of stocks
Stock with P200.00 or fraction   1%   
par value thereof     Actual value represented by each
        share
       
Original      
Issue of    
Shares of   2.00
Stock P200.00 or fraction 1%
without par thereof
value
 
 
Stock
Dividend
175   Sales, P200.00 or fraction 1.50        0.75 Par value of such stock
Agreements thereof        %  
to Sell,    
Memoranda    
of Sales,    
Deliveries    
or Transfer   DST paid upon the original
of Shares or   issuance of said stock.
Certificates 50%
 of Stock   
 
Stock
without par
value

196 Deed of First 1,000 15.00 1.5% Consideration or Fair Market

Sale,       Value, whichever is higher (if  
Conveyance       government is a party, basis shall
s, Donations       be the consideration)
of Real          
Property       Consideration or Fair Market
(except       Value, whichever is higher (if  
grants,       government is a party, basis shall
patents or       be the consideration)
original      
certificate of For each additional 15.00 1.5%
adjudication P1,000 or fractional
issued by part thereof in excess  
the of P1,000
government)

The following are transactions deemed sale and therefore subject to VAT:

1. Transfer, use or consumption not in the course of business of goods or properties originally
intended for sale or for use in the course of business (i.e., when a VAT-registered person withdraws
goods from his business for his personal use)

2. Distribution or transfer to: a. Shareholders or investors as share in the profits of the VAT-
registered persons

NOTE: Property dividends which constitute stocks in trade or properties primarily held for sale or
lease declared out of retained earnings on or after January 1, 1996 and distributed by the company
to its shareholders shall be subject to VAT based on the zonal value or fair market value at the time
of distribution, whichever is applicable (Sec. 106.7, R.R. 16- 2005).

b. Creditors in payment of debt

3. Consignment of goods if actual sale is not made within sixty (60) days following the date such
goods were consigned.

NOTE: Consigned good returned by the consignee within the 60-day period are not deemed sold.

4. Retirement from or cessation of business with respect to all goods on hand, whether capital
goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether
or not the business is continued by the new owner or successor (Sec. 106 (B) NIRC).

Transactions that are considered retirement or cessation of business

1. Change of ownership of the business. There is change in the ownership of the business when a
single proprietorship incorporates; or the proprietor of a single proprietorship sells his entire
business.
2. Dissolution of a partnership and creation of a new partnership which takes over the business (Sec.
4.106- 7, R.R. 16-2005).

Consideration in determining whether a transaction is “deemed sale”

Before considering whether the transaction is “deemed sale”, it must first be determined whether
the sale was in the ordinary course of trade or business or not. Even if the transaction was “deemed
sale” if it was not done in the ordinary course of trade or business or was not originally intended for
sale in the ordinary course of business, the transaction is not subject to VAT (CIR v. Magsaysay Lines
Inc., G.R. No. 146984, July 28, 2006).

Tax base of transactions deemed sale In cases where a transaction is a deemed sale, barter or
exchange of goods or where the selling price is unreasonably lower than the actual market value, the
Commissioner shall determine the appropriate tax base.

NOTE: The gross selling price is unreasonably lower than the actual market value if it is lower by
more than 30% of the actual market value of the same goods of the same quantity and quality sold
in the immediate locality on or nearest the date of sale (Sec. 4 106-7, R.R. 16-2005).