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  1. Grant Thornton Philippines
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  5. 2020
  6. Revised rules in the determination of fair market value of unlisted shares

Tax Alert

19 Aug 2020
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Revised rules in the determination of fair market value of unlisted shares

(Revenue Regulations No. 20-2020 issued on August 18, 2020)

This Tax Alert is issued to inform all concerned on the revised rules in the determination of fair market value of shares of stocks not traded through a local stock exchange.  

For sale, barter or exchange of shares not traded though the local stock exchange, the fair market value of shares of stocks shall be determined as follows:

  1. Common shares - the book value (BV) of common shares on the latest available financial statements duly certified by an independent Certified Public Accountant prior to the date of sale but not earlier than the immediately preceding year. Adjusted net asset method is no longer applicable.
  2. Preferred shares - liquidation value, which is equal to the redemption price of the shares as of the balance sheet date nearest to the transaction date, including any premium and cumulative preferred dividends in arrears.

In case there are both common and preferred shares, the book value per common share is computed by deducting the liquidation value of the preferred shares from the total equity of the corporation.

In view of the new rules, appraisal of the real properties of the investee company is no longer required.

The revenue regulations shall be effective after 15 days following its publication today, August 19, 2020, in Malaya Business Insight.

.

RR No. 20-2020
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