REVENUE MEMORANDUM CIRCULAR NO. 72-2026 issued on June 30, 2026 clarifies the tax treatment of transfers of proprietary club shares held under nominee or trust agreements, dispensing with prior confirmatory ruling subject to post-audit verification

The transfer of legal title from one nominee-trustee to another shall not be subject to Capital Gains Tax (CGT) under Section 24(B)(3) of the National Internal Revenue Code of’ 1997, as amended (Tax Code), provided that there is no sale, exchange, or other disposition involving the transfer of beneficial ownership, and the trustor-corporation remains to be the beneficial owner of the share, with the transfer constituting merely a change in legal title that does not alter the economic ownership. control. or enjoyment of the share.

The existence of a trust arrangement must be established by clear and convincing evidence, such as a duly executed trust agreement or other contemporaneous documentation showing that the nominee merely holds the share for the benefit of the corporation, including proof that the consideration for the share was paid by the corporation, recognition of the share as a corporate asset in its books, and the absence of any personal beneficial interest on the part of the nominee

The transfer shall not be subject to Documentary Stamp Tax (DST) under Section 175 of the Tax Code, provided that there is no transfer of beneficial ownership and the trustor-corporation remains to be the beneficial owner of the share, consistent with the principle that DST is imposed only on documents evidencing a transfer of ownership or rights or the exercise of a taxable privilege.

The transfers of proprietary club shares held under nominee or trust agreements is not subject to Donor’s Tax since the corporation remains its beneficial owner under such agreements.

The BIR dispenses with the requirement of securing a prior confirmatory ruling for the transfer of proprietary club shares held under a nominee or trust arrangement without prejudice to the Bureau’s authority to conduct post-audit verification to determine compliance with applicable tax laws and regulations, and subject to the application of the substance-over-form doctrine and other anti-tax avoidance principles, provided that for such transfer the following conditions are strictly met:

a. The corporation remains the beneficial owner;
b. The transfer is documented by a Declaration of Trust or Trust Agreement;
c. The share is recorded as a corporate asset in the company’s books; and
d. The transfer is made without any monetary or non-monetary consideration,
directly or indirectly, in favor of the outgoing or incoming nominee.

Any misrepresentation or failure to comply with the foregoing conditions shall subject the transaction to the applicable taxes, penalties, and surcharges under the Tax Code and existing revenue issuances, including possible recharacterization of the transaction based on its true nature.

Taxpayers or their duly authorized representatives may file an application for the issuance of an electronic Certificate Authorizing Registration (eCAR) directly with the Revenue District Office (RDO) having jurisdiction over the issuer of the share. The application shall be initiated through the formal submission of a complete set of documentary requirements to the One-Time Transaction (ONETT) Section of the RDO, to wit:

i. Notarized Deed of Assignment/Transfer executed between the outgoing and incoming nominee-trustees;
ii. Original Declaration of Trust or Trust Agreement covering the outgoing nominee, and a new Declaration of Trust or Trust Agreement covering the incoming nominee:
iii. Proof that the corporation paid for the share and that it is carried and maintained as a corporate asset in the company’s books of accounts: and
iv. Secretary’s Certificate or Board Resolution confirming that the transfer is without monetary consideration and does not involve transfer of beneficial ownership over the share.

All applications for confirmatory ruling pertaining to the transfer of proprietary club shares held under a nominee or trust arrangement that are currently pending before the BIR shall no longer be acted upon. The applicants in such pending cases may proceed directly to the RDO having jurisdiction over the transaction for the processing of the eCAR subject to compliance with the documentary requirements and conditions prescribed under the Circular.