Special InTAX: June 2021 Issue 1 | Volume 2

InTAX is an official publication of R.G. Manabat & Co.'s Tax Group

InTAX is an official publication of R.G. Manabat & Co.'s Tax Group

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special intax


Supreme Court


The Supreme Court (SC) ruled that the gain realized from the sale of shares acquired through a tax-free exchange transaction is subject to Capital Gains Tax (CGT).

In ruling for the taxpayer, the SC emphasized that when the property or shares of stock acquired through a tax-free exchange is subsequently sold, the said subsequent sale shall now be subject to income tax. This is because, in a tax-free exchange, the recognition of gain or loss arising from the exchange is merely deferred. In case of sale of shares acquired through a tax-free exchange transaction, the BIR has recognized in its several rulings that the gain realized is subject to CGT. Therefore, the subsequent disposition of HSBC's GPAP-Phils. Inc. shares in favor of GPAP-Singapore is subject to CGT and not to regular corporate income tax under Section 27(A) of the Tax Code, upon which the CIR based its assessment of deficiency income tax on the alleged sale of “goodwill”.

The SC also upheld that the methodology adopted by HSBC* to minimize taxes is not considered as a tax evasion scheme but only a tax avoidance scheme. Here, HSBC simply availed of tax saving devices within the means sanctioned by law. [Commissioner of Internal Revenue (CIR) vs. The Hongkong Shanghai Banking Corporation Limited – Philippine Branch (HSBC), G.R. No. 227121 dated 9 December 2020; uploaded in the SC website on 15 June 2021]

* HSBC entered into two transactions: (1) transfer of the assets of its Merchant Acquiring Business (MAB) in the Philippines to GPAP-Phils. Inc. in exchange for shares, pursuant to the tax-free exchange provision under Section 40(C)(2) of the Tax Code, and (2) subsequent sale or assignment of such shares to GPAP-Singapore and paid the corresponding CGT in accordance with Section 27(D)(2) of the same Code.


Department of Finance


The Department of Finance (DOF) issued Revenue Regulations (RR) No. 10-2021, 4 January 2021, to amend pertinent provisions of Section 10 of RR  No. 20-2018. This covers the imposition of excise tax on every removal of sweetened beverages products for export from its place of production.

After payment of the said tax, the manufacturer may opt to file a claim for excise tax credit/refund pursuant to Sections 204 and 229 of the NIRC; or may avail of a claim for product replenishment scheme in accordance with the prescribed provisions under Section 6 of RR 3-2008 subject to the given terms and conditions.

Failure to submit proof of exportation within the prescribed period shall be construed as non-exportation of the particular articles, thus, will be subjected to the corresponding applicable tax inclusive of penalties. Moreover, payment of assessed applicable tax due on such unliquidated export including penalties must be paid first before the issuance of export permits.

(RGM & Co. Note:  The RR was published in Malaya Business Insight on 18 June 2021)


Attached are the full texts of the issuances.

Revenue Regulations No. 10-2021

CIR vs HSBC Limited Philippine Branch GR No. 227121 dated 09 December 2020

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