{"id":342,"date":"2019-03-13T07:36:11","date_gmt":"2019-03-13T07:36:11","guid":{"rendered":"http:\/\/scp-ph.com\/blogsite\/?p=342"},"modified":"2019-03-13T07:36:14","modified_gmt":"2019-03-13T07:36:14","slug":"birs-current-stand-on-the-sec-100-of-the-tax-code","status":"publish","type":"post","link":"https:\/\/scp-ph.com\/blogsite\/?p=342","title":{"rendered":"BIR\u2019s current stand on the Sec. 100 of the Tax Code"},"content":{"rendered":"\n<ul class=\"wp-block-gallery columns-1 is-cropped wp-block-gallery-1 is-layout-flex\"><li class=\"blocks-gallery-item\"><figure><img decoding=\"async\" loading=\"lazy\" width=\"288\" height=\"156\" src=\"https:\/\/scp-ph.com\/blogsite\/wp-content\/uploads\/2019\/03\/tax_code-1.jpg\" alt=\"\" data-id=\"344\" data-link=\"https:\/\/scp-ph.com\/blogsite\/?attachment_id=344\" class=\"wp-image-344\" \/><\/figure><\/li><\/ul>\n\n\n\n<p>BIR issues amendments to clarify Section 100 of National Internal\nRevenue Code (NIRC) of 1997 (the Tax Code), particularly on the issue of the\nexistence or non-existence of \u201cdeemed gift.\u201d <\/p>\n\n\n\n<p>Prior to enactment of the TRAIN Law, Section 100 of the Tax Code, the measurement\nof gain from a disposition of property merely considers the amount realized\nfrom the sale, which is the selling price minus the basis of the property sold,\nhence, parties are discouraged to a sale from manipulating their selling price\nin order to save on income taxes. <\/p>\n\n\n\n<p>If the parties would declare a lower selling price per document of sale\nthan the actual amount of money which changed hands, there is foregone revenue\nand the government is placed at a very disadvantageous position. In order to plug\nthis tax leakage, Section 100 automatically treats the disparity between the\nfair market value and selling price of the property as gift subject to donor\u2019s\ntax. <\/p>\n\n\n\n<p>In short, the \u201cdeemed gift\u201d provision compliments the income tax rule on\nthe measurement of gain and accordingly, works to avoid the recurrence of\nunder-declaration of the selling price. <\/p>\n\n\n\n<p>In <em>the Philippine American Life\nand General Insurance Company vs. Secretary of Finance, et. Al., <\/em>where the\nSupreme Court ruled that: \u201cthe absence of donative intent, if that be the case\ndoes not exempt the sales of stock transaction from donor\u2019s tax since Section\n100 of the NIRC categorically states that the amount by which the fair market\nvalue of the property exceeded the value of the consideration shall be deemed a\ngift. Thus, even if there is no actual donation, the difference in price is\nconsidered a donation. <\/p>\n\n\n\n<p>The TRAIN Law which took effect on January 1, 2018, however, provides an\nexception. Section 100 of the Tax Code now further states that \u201cProvided, however,\nthat a sale, exchange or other transfer of property made in the ordinary course\nof business (a transaction which is a bona fide, at arm\u2019s length, and free from\nany donative intent), will be considered as made for an adequate and full\nconsideration in money or money\u2019s worth.\u201d<\/p>\n\n\n\n<p>Under the rules of statutory construction, exceptions, as a rule, should\nbe strictly, but reasonably construed; they extend only so far as their\nlanguage fairly warrants and all doubts should be resolved in favor of the\ngeneral provisions rather than exception. <\/p>\n\n\n\n<p>The appropriate and natural and natural office of the exception is to\nexempt something from the scope of the general words of a statute which is\notherwise within the scope and meaning of such general words. Consequently, the\nexistence of an exception in a statute clarifies the intent that the statute\nshall apply to all cases not excepted. <\/p>\n\n\n\n<p>Exceptions are subject to the rule of strict construction; hence, any\ndoubt will be resolved in favor of the general provision and against the\nexception. Indeed, the liberal construction of a statute will seem to require\nmany circumstances that the exception, by which the operation of the statute is\nlimited or abridged, should receive a restricted construction. <\/p>\n\n\n\n<p>Thus, starting January 1, 2018, when shares of stock not traded in stock\nexchange are sold for less than its fair market value, the excess of the fair\nmarket value over the selling price shall be treated as gift subject to donor\u2019s\ntax imposed by Section 100 of the 1997 NIRC, as amended, except when it is sold\nat arm\u2019s length, free from any donative intend (in the ordinary course of\nbusiness). <\/p>\n\n\n\n<p>The determination of whether the sale of shares of stock not listed and\ntraded is at arm\u2019s length is a question of fact and not of law. Since an arm\u2019s\nlength transaction is a question of fact, it therefore behooves upon the party\nseeking to apply the exception to prove that indeed the sale involves no\nirregularity between unrelated and independent parties. <\/p>\n\n\n\n<p>This would require presentation and reception of reasonable evidence enough\nto convince that the sale of the shares of stock for less than its FMV is\nwithout intent to evade tax and defraud the government (of the tax due\ntherein). There evidence that should be presented should be viewed in\naccordance with its relation and relevance to the transaction on a case to case\nbasis. <\/p>\n\n\n\n<p>All revenue officials and employees are hereby enjoined to this Circular\nas wide a publicity as possible. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>BIR issues amendments to clarify Section 100 of National Internal Revenue Code (NIRC) of 1997 (the Tax Code), particularly on the issue of the existence or non-existence of \u201cdeemed gift.\u201d &#8230;<\/p>\n","protected":false},"author":5,"featured_media":344,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0},"categories":[5],"tags":[],"_links":{"self":[{"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/posts\/342"}],"collection":[{"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=342"}],"version-history":[{"count":1,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/posts\/342\/revisions"}],"predecessor-version":[{"id":345,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/posts\/342\/revisions\/345"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=\/wp\/v2\/media\/344"}],"wp:attachment":[{"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=342"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=342"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scp-ph.com\/blogsite\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=342"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}