Clarifying 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

A common issue for corporations holding proprietary club shares through officer-nominees is establishing that transfers such shares are not subject to Capital Gains Tax (CGT), Documentary Stamp Tax (DST), or Donor's Tax. Since proprietary club memberships are typically required to be registered in the name of a natural person, corporations often designate officers as nominees or trustees. When they retire or are replaced, the share is transferred to a new nominee while beneficial ownership remains with the corporation.

In line with the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 (Republic Act No.11032), the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 72-2026 to simplify the tax treatment of the above-mentioned issue, effective immediately.

The BIR clarified that nominee-to-nominee transfers of proprietary club shares are not subject to CGT as there is no transfer of beneficial ownership. Citing Sime Darby Pilipinas, Inc. v. Mendoza, G.R. No. 202247 (19 June2013), it is recognized that while corporate officers hold legal title for membership purposes, the corporation shall remain as the beneficial owner. Accordingly, a replacement nominee does not constitute a taxable disposition. 

Similarly, the transfer is not subject to DST under Section 175 of the Philippine Tax Code, as amended, since it merely involves a change in the officer-nominee acting as a trustee, not a transfer of beneficial ownership from the corporation. 

Neither is the transfer subject to Donor's Tax. As the corporation remains the beneficial owner and merely replaces the officer-nominee as needed, the essential elements of a donation are incomplete, according to Article 725 of the New Civil Code. In other words, there is no intent to make a gratuitous transfer (animus donandi) on the corporation’s part.

In lieu of securing a ruling and to avoid payment of applicable taxes and fees, the following conditions must be proven clearly and conclusively:

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

Processing of the electronic Certificate Authorizing Registration (“eCAR”) for the transfer of shares shall also be done in the Revenue District Office (RDO) where the issuer of shares is registered. The following documents must be presented: 

1. Notarized Deed of Assignment/Transfer executed between the outgoing and incoming nominee-trustees; 
2. Original Declaration of Trust or Trust Agreement covering the outgoing nominee, and a new Declaration of Trust or Trust Agreement covering the incoming nominee; 
3. 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 
4. 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. 
5. Lastly, the BIR clarified that pending requests for rulings on such transfers will no longer be acted upon.

The Circular took effect on June 30, 2026. Please be guided accordingly.

Source:   

P&A Grant Thornton 

Certified Public Accountants 

P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.

As published in SunStar Cebu, dated 16 July 2026