REPUBLIC ACT NO. 7717 - AN
ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK
LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL
PUBLIC OFFERING, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED, BY INSERTING A NEW SECTION AND REPEALING CERTAIN
SUBSECTIONS THEREOF
Section 1. A new section is hereby inserted in the National
Internal Revenue Code, as amended, as Section 124-A, which shall read
as follows:
Sec. 124-A. Tax on Sale, Barter or Exchange of Shares
of Stock Listed and Traded through the Local Stock Exchange or through
Initial Public Offering. — (a) Tax on sale, barter or exchange of
shares of stock listed and traded through the local stock exchange. —
There shall be levied, assessed, and collected on every sale, barter,
exchange, or other disposition of shares of stock listed and traded
through the local exchange other than the sale by a dealer in
securities, a tax at the rate of one-half of one percent (1/2 of 1%) of
the gross selling price or gross value in money of the shares of stock
sold, bartered, exchanged, or otherwise disposed which shall be paid by
the seller or transferor.
It shall be the duty of every stock broker who effected the sale
subject to the tax imposed herein to collect the tax and remit the same
to the Bureau of Internal Revenue in five (5) banking days from the
date of collection thereof and to submit on Mondays 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 of all the
transactions effected through him during the preceding week and of
taxes collected by him and turned over to the Bureau of Internal
Revenue.
(b) Tax on shares of stock sold or exchanged through
initial public offering. — There shall be levied, assessed, and
collected on every sale, barter, exchange, or other disposition through
initial public offering of shares of stock in closely held
corporations, as defined herein, a tax at the rates provided hereunder
based on the gross selling price or gross value in money of the shares
of stock sold, bartered, exchanged, or otherwise disposed in accordance
with the proportion of shares of stock sold, bartered, exchanged, or
otherwise disposed to the total outstanding shares of stock after the
listing in the local stock exchange:
33 1/3% or below 4%
Over 33 1/3% but below 50% 2%
Over 50% 1%
The tax herein imposed shall be paid by the issuing corporation in
primary offering or by the seller in secondary offering.
For purposes of this section, the term "closely held corporation" means
any corporation at least fifty percent (50%) in value of the
outstanding capital stock or at least fifty percent (50%) of the total
combined voting power of all classes of stock entitled to vote is owned
directly or indirectly by or for not more than twenty (20) individuals.
For purposes of determining whether the corporation is a closely held
corporation, in so far as such determination is based on stock
ownership, the following rules shall be applied:
(1) Stock not owned by individuals. — Stock owned
directly or indirectly by or for a corporation, partnership, estate or
trust shall be considered as being owned proportionately by its
shareholders, partners, or beneficiaries.
(2) Family and partnership ownerships. — An
individual shall be considered as owning the stock owned, directly or
indirectly, by or for his family, or by or for his partner. For
purposes of this paragraph, the family of an individual includes only
his brothers and his sisters (whether by the whole or half-blood),
spouse, ancestors, and lineal descendants.
(3) Option. — If any person has an option to acquire
stock, such stock shall be considered as owned by such person.
For purposes of this paragraph, an option to acquire such an option and
each one of a series of options shall be considered as an option to
acquire such stock.
(4) Constructive ownership as actual ownership. —
Stock constructively-owned by reason of the application of paragraph
(1) or (3) shall, for purposes of applying paragraph (1) or (2), be
treated as actually owned by such person; but stock constructively
owned by the individual by reason of the application of paragraph (2)
hereof shall not be treated as owned by him for purposes of again
applying such paragraph in order to make another the constructive owner
of such stock.
In case of primary offering, the corporate issuer shall file the return
and pay the corresponding tax within thirty (30) days from the date of
listing of the shares of stock in the local stock exchange. In
the case of secondary offering, the provision of subsection (a) of this
section shall apply as to the time and manner of the payment of the
tax.
(c) Common provisions. — Any gain derived from the
sale, barter, exchange, or other disposition of shares of stock under
this section shall be exempt from the tax imposed in Section s 21(d),
24(e)(2), 25(a)(6)(C), and 25(b)(5)(C) of this Code and from the
regular individual or corporate income tax. Tax paid under this
section shall not be deductible for income tax purposes.
Sec. 2. For a period of one (1) year after the
effectivity of this Act, the tax imposed on the sale, barter, exchange,
or other disposition of stock listed and traded through the local stock
exchange shall be three-eights of one percent (3/8 of 1%).
Sec. 3. Section s 21(d)(2), 24(e)(2)(B),
25(a)(6)(C)(ii), and 25(b)(5)(C)(ii) of the National Internal Revenue
Code, as amended, are hereby repealed.
Sec. 4. The Secretary of Finance, upon the
recommendation of the Commissioner of Internal Revenue, shall within
ninety (90) days from the effectivity of this Act promulgate such rules
and regulations as may be necessary for the effective implementation
hereof.
Sec. 5. This Act shall take effect fifteen (15)
days after its publication in the Official Gazette or in at least two
(2) national newspapers of general circulation whichever comes earlier.
Approved: May 5, 1994
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