QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 47-97)
No. Based on jurisprudence, physical or constructive delivery is not essential; what is taxed is the privilege of issuing shares, and tax accrues when the shares are issued/ subscription accepted.
The Supreme Court held that delivery of certificates (actual or constructive) is not essential for the tax to attach; the tax accrues at the time the shares are issued because the privilege of issuing shares is being taxed.
Yes. As a general rule of corporation law, a subscriber becomes a stockholder upon acceptance of the subscription, entitled to rights and subject to liabilities even if no certificate has been issued.
It shifts the focus from the act of physically handing over certificates to the corporate act of accepting the subscription, which is the taxable event.
It should be paid at the time of acceptance of the subscriptions (when the shares are issued for tax purposes), not at the time of later delivery.
The shares can be alienated; dividends can be enjoyed; and the shares can be conveyed, pledged, or encumbered—indicating ownership attributes.
When the corporation accepts the subscriber’s subscription, regardless of whether a certificate is issued or delivered.
Since ownership and the ability to exercise shareholder rights arise upon acceptance, the shares are treated as issued; thus documentary stamp tax must still be paid.
It was observed that some corporations did not pay the tax required under Section 175. The circular clarifies that the tax attaches at acceptance of subscription, not upon physical delivery of certificates.
They were enjoined to give the circular as wide publicity as possible.
Both concepts align at acceptance of subscription: stockholder status arises upon acceptance, and tax attaches at the same time because shares are considered issued for tax purposes.