Doc Stamp Tax on Stock Issuance

The documentary stamp tax on original issues of certificates of stock under Section 175 of the Tax Code, as amended, attaches upon acceptance by the corporation of the stockholder’s subscription in the corporation’s capital stock.
The tax attachment occurs regardless of physical issuance and delivery of the certificate of stock to the stockholder.
The documentary stamp tax is imposed on the privilege of issuing shares of stock, and taxes accrue at the time the shares are issued.
Delivery of certificates (whether actual or constructive) is not essential for the documentary stamp tax to attach.

The term “original issue” is treated as the point when the stockholder acquires and may exercise attributes of ownership over the shares.
Shares are considered issued even if the certificate is not in the actual or constructive possession of the stockholder, because the shares are treated as having value.
Shares can be alienated, and dividends or fruits derived from the shares can be enjoyed.
Shares may be conveyed, pledged, or encumbered.

A subscriber becomes a stockholder as soon as the subscription is accepted by the corporation, whether or not a certificate is issued.
Stockholder status arises even if the subscriber has no certificate, and the stockholder is entitled to the rights and subject to the liabilities of a stockholder.
A person may therefore own shares of stock without possessing a certificate of stock.

The circular anchors the rule on Section 175 of the Tax Code and its implementing rules and regulations.
The circular ties the attachment rule to the BIR Handbook on National Internal Revenue Taxes (1988 Edition), and to a cited Opinion of the Secretary of Justice contained therein.
The circular relies on Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc. and the Court of Tax Appeals, L-68230, November 25, 1986, 145 SCRA 671, for the proposition that taxes attach when shares are issued and that certificate delivery is not essential.
The circular also cites a SEC Opinion dated December 16, 1983 referencing 11 Fletcher Cyc. Corp., 5094 for the rule on stockholder status upon acceptance of subscription.

All revenue officials and employees must apply the attachment rule consistent with the circular’s guidance on when documentary stamp tax accrues.
Revenue officials and employees must give the circular as wide a publicity as possible to ensure compliance.