Perks cleared: BIR simplifies tax rules on club shares held in trust

If your company owns shares in a proprietary club, chances are those shares are not sitting in the name of the corporation. Instead, the shares are registered under the name of one of the company’s officers. This does not mean that the company gave the shares away. This arrangement exists because most proprietary clubs do not allow corporations to hold memberships in their own names, as their by-laws require memberships to be registered in the name of a natural person.

The wrinkle comes when that officer retires, resigns or otherwise needs to relinquish the shares, and the company must transfer them to the next nominee. Because legal title changes hands, the transaction looks, at first glance, to be a sale or donation of shares. That resemblance used to cost companies significant time and money. It has been a common practice of taxpayers to secure a confirmatory ruling from the Bureau of Internal Revenue (BIR) just to establish that no capital gains tax (CGT), documentary stamp tax (DST) or donor’s tax was due.

Revenue Memorandum Circular (RMC) 72-2026, issued by the BIR on June 30, 2026, finally dispenses with the requirement to obtain a prior confirmatory ruling from the BIR. Moving forward, companies no longer need a prior ruling before transferring club shares between nominees or trustees. The circular instead allows taxpayers to process the transfer directly, subject to the submission of certain documents and the BIR’s post-audit verification.

RMC 72-2026 clarifies that the transfer of proprietary club shares between nominees or trustees, where the beneficial ownership remains with the corporation, is not subject to CGT, DST and donor’s tax. CGT does not apply because there is no sale, exchange or disposition of beneficial ownership as the company remains the real owner throughout and the trustee holds the said shares for the corporation’s benefit. DST does not also apply because there is no actual or constructive transfer of beneficial ownership, and the incoming nominee is merely a new depository of the same corporate asset.

Lastly, donor’s tax will not apply because a donation requires the donor’s intent to give something away for free, but in the trust arrangement, the company does not part with the ownership of the shares. The incoming nominee merely preserves the status quo. This means the company remains the real owner of the shares and the incoming nominee just takes care of the shares for the company’s benefit.

None of this is automatic, though. The circular sets four conditions that must be met for a  transfer to qualify for this simplified, ruling-free treatment: the corporation must remain the beneficial owner of the share; the arrangement must be documented through a Declaration of Trust or Trust Agreement; the share must be recorded as a corporate asset in the company’s books and the transfer must happen without any form of consideration in favor of either the outgoing or incoming nominee. Get any of these wrong, and the BIR can recharacterize the transaction and assess the applicable taxes, penalties and surcharges as if the exemption never applied.

Meanwhile, once these requirements are met, companies can now go straight to the Revenue District Office (RDO) that has jurisdiction over the club to apply for the electronic Certificate Authorizing Registration (eCAR) needed to complete the transfer. The application should be supported by a notarized Deed of Assignment or Transfer between the outgoing and incoming nominees, the original Declaration of Trust covering the outgoing nominee together with a new one for the incoming nominee, proof that the company paid for and continues to carry or maintain the share as a corporate asset, and a Secretary’s Certificate or Board Resolution confirming that there was no consideration involved and no transfer of beneficial ownership.

With the advent of RMC 72-2026, all applications for confirmatory rulings that were already pending with the BIR before the circular came out will no longer be acted upon and the applicants-taxpayers are directed to bring their applications straight to the RDO instead.

Overall, for companies that maintain club memberships as perks for their officers, this is welcome housecleaning from the BIR. It trims a step that previously added cost and delay. However, the trade-off is that getting the paperwork right now falls squarely on the taxpayer, since the safety net of an upfront BIR ruling is gone. Keeping the trust documentation airtight, the books consistent and the paper trail free of any hint of consideration is what will keep the perks from turning into an unwelcome tax assessment down the road.

Mark Phillip Ingente is a Supervisor from the Tax Group of R.G. Manabat & Co. (KPMG in the Philippines), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Mark Phillip Ingente or Eugene Pulga through [email protected], social media or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.