Philippines Tax Agency Issues Ruling Clarifying Taxation of Liquidating Dividends, Surrendered Shares

The Philippine Bureau of Internal Revenue Oct. 6 issued BIR Ruling No. 574-2020, clarifying the taxation of liquidating dividends and surrendered shares upon dissolution of a company. The tax agency explained that: 1) the shareholders will be required to pay capital gains tax at the 30 percent corporate income tax rate for gains recognized in cash and assets in exchange for surrendered shares; 2) the liquidating company will not be taxed on its receipt of surrendered shares because the transaction is not treated as a sale; 3) the distribution of the company’s remaining assets to its shareholders will be subject ...