Law Summary
Legal Basis and Jurisprudence
- Cites the BIR Handbook on National Internal Revenue Taxes (1988), the Opinion of the Secretary of Justice, and Supreme Court rulings.
- Key case referenced: Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc. (L-68230, November 25, 1986, 145 SCRA 671), which clarified that DST attaches upon issuance of shares regardless of physical delivery of certificates.
Definition and Meaning of "Original Issue"
- The "original issue" refers to the point when the stockholder acquires ownership attributes over the stock.
- Attributes include the ability to alienate, enjoy dividends, convey, pledge, or encumber the stocks.
- The certificate is considered issued once it possesses value, regardless of physical possession.
Timing of Tax Liability
- DST attaches upon acceptance by the corporation of the stock subscription by the stockholder.
- Physical or constructive delivery of the certificate is not essential for the tax to accrue.
Rights and Status of Stockholders Without Certificates
- A subscriber becomes a stockholder upon acceptance of their stock subscription even without receiving a physical certificate.
- Such stockholders have all rights and obligations incumbent upon stock ownership.
- This principle aligns with general corporation law and is supported by SEC opinion (December 16, 1983) and legal references (11 Fletcher Cyc. Corp., 5094).
Enforcement and Publicity
- All revenue officials and employees are mandated to widely disseminate the circular to ensure compliance.
Summary of Key Points
- Documentary Stamp Tax on shares is due upon stock subscription acceptance.
- Physical issuance or delivery of stock certificates is not a prerequisite for DST.
- Ownership rights attach upon acceptance, not certificate possession.
- Legal and tax authorities confirm the point of tax liability accrual.
- The circular serves to reinforce strict adherence to tax obligations related to share issuance.