Is There Still a Percentage Tax on IPO Share Sales? Why Section 127(B) Was Repealed
NIRC Section 127(B) once imposed a special percentage tax — 1% to 4% of the gross selling price, depending on how much of the company was floated — on shares of stock in closely held corporations sold through an initial public offering (IPO), but Republic Act (RA) No. 11494 repealed it entirely, effective September 15, 2020. A company going public in 2026 pays no equivalent IPO-specific tax; instead, once its shares are listed and traded on the Philippine Stock Exchange (PSE), sales fall under the ordinary Section 127(A) stock transaction tax that applies to any PSE-listed share sale.
This distinction matters for anyone researching the tax cost of a Philippine IPO from older material, since a fair amount of tax-review content online — CPA board exam reviewers among them — still cites the repealed rates as current law. For the mechanics of the tax that does apply to PSE-listed share sales today, see BIR Form 2552: How the Stock Transaction Tax on PSE-Listed Shares Actually Gets Filed, and for the capital gains treatment of shares that never go through an exchange, see BIR Form 1707: Capital Gains Tax Return for Sale of Shares of Stock Not Traded on the Stock Exchange.
Keep Your Other BIR Filings Organized While You Track Regulatory Changes FREE →What did Section 127(B) actually tax, and at what rates? #
Before its repeal, NIRC Section 127(B) taxed every sale, barter, exchange, or other disposition of shares of a closely held corporation made specifically through an IPO, at a rate tied to what proportion of the company’s total outstanding shares the IPO floated. A “closely held corporation” for this purpose generally meant one where at least 50% of the value of outstanding capital stock, or at least 50% of total combined voting power, was owned by not more than 20 individuals — the typical profile of a private company preparing to go public for the first time.
The statutory text, as it read before repeal, provided:
“There shall be levied, assessed and collected on every sale, barter, exchange or other disposition through initial public offering of shares of stock in closely held corporations, as defined herein, a tax at the rates provided hereunder based on the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed in accordance with the proportion of shares of stock sold, bartered, exchanged or otherwise disposed to the total outstanding shares of stock after the listing.”
— NIRC Section 127(B), as it read prior to repeal by RA No. 11494
The rate tiers, based on that proportion sold to total outstanding shares after listing, were:
| Proportion of shares sold to total outstanding shares after listing | Tax rate on gross selling price |
|---|---|
| Up to 25% | 4% |
| Over 25% but not over 33⅓% | 2% |
| Over 33⅓% | 1% |
The design meant a company that floated a smaller slice of itself paid a proportionally higher rate on that slice — a structure meant to discourage token public offerings that kept most shares closely held while still claiming public-company status.
What did RA No. 11494 actually do, and when did it take effect? #
Section 6 of Republic Act No. 11494 — the Bayanihan to Recover as One Act, commonly called “Bayanihan 2,” enacted as part of the government’s COVID-19 economic response — repealed Section 127(B) outright rather than reducing or suspending it. The BIR implemented the repeal through Revenue Regulations (RR) No. 23-2020, issued September 30, 2020, which confirmed the change took effect on RA No. 11494’s own effectivity date of September 15, 2020.
RR No. 23-2020 states the effect plainly:
“Thus, every sale, barter, exchange, or other disposition through IPO of shares of stock in closely held corporations shall no longer be subject to the tax imposed under Section 127(B) upon the effectivity of RA 11494.”
— Revenue Regulations No. 23-2020, implementing Section 6 of RA No. 11494
Unlike the temporary percentage-tax-rate reduction under the CREATE Act (see Is Percentage Tax 1% or 3%? The CREATE Act Reduction and Why It Reverted), which was a time-bound relief measure that expired and reverted, the Section 127(B) repeal was permanent — there is no sunset clause reinstating the IPO tax on a future date, and no subsequent law has revived it as of 2026.
What applies to an IPO share sale instead, today? #
Once a company’s shares are sold through an IPO and become listed and traded on the PSE, those sales fall under the ordinary stock transaction tax in NIRC Section 127(A) — the same percentage tax charged on any subsequent trade of already-listed shares through the local exchange, currently 0.1% of gross selling price after the CMEPA rate cut. There is no longer a separate, higher rate specific to the IPO transaction itself; a share sold on the day of listing and a share of the same stock sold a year later are taxed identically under Section 127(A), collected by the selling stockbroker rather than self-assessed by the seller.
| Before repeal (pre-September 2020) | Today (2026) | |
|---|---|---|
| Tax on the IPO sale itself | Section 127(B): 1%–4% of gross selling price, tiered to float size | None — Section 127(B) repealed |
| Tax on the shares once listed and trading | Section 127(A): stock transaction tax on ordinary trades | Section 127(A): same stock transaction tax, now 0.1% (CMEPA), applies to the IPO sale itself too |
| Who remits it | Seller self-assessed under 127(B); broker collects under 127(A) | Broker collects and files BIR Form 2552 |
This is a meaningfully lower cost of going public than the pre-2020 regime produced for a company floating a small percentage of its shares: a company selling 20% of its outstanding shares in an IPO paid 4% under old Section 127(B) on that tranche, versus 0.1% under today’s Section 127(A) rate on the same transaction.
Worked example: comparing the old and current rules on the same IPO #
Consider a closely held manufacturing company that lists on the PSE in 2026, with existing shareholders selling 5,000,000 shares at ₱10.00 per share — a ₱50,000,000 gross selling price — representing 20% of the company’s total outstanding shares after listing.
| Item | Under the repealed Section 127(B) (pre-Sept. 2020) | Under current law (2026) |
|---|---|---|
| Applicable rate | 4% (20% of outstanding shares sold is within the “up to 25%” tier) | 0.1% (Section 127(A), CMEPA rate) |
| Tax base | ₱50,000,000 gross selling price | ₱50,000,000 gross selling price |
| Tax due | ₱2,000,000 | ₱50,000 |
| Who computed and remitted it | The seller (or issuer), self-assessed | The selling stockbroker, via BIR Form 2552 |
Under the old rule, the ₱2,000,000 was a cost specific to the act of going public — on top of any listing fees, underwriting costs, and other IPO expenses. Under current law, that same transaction generates a ₱50,000 stock transaction tax, identical in rate and mechanics to any ordinary trade of the stock after listing.
Frequently asked questions #
Is there still a special percentage tax on shares sold through an initial public offering in the Philippines? #
No. NIRC Section 127(B), which taxed shares of stock in closely held corporations sold through an initial public offering (IPO) at rates of 1% to 4% of the gross selling price, was repealed by Section 6 of Republic Act No. 11494 (the Bayanihan to Recover as One Act, or Bayanihan 2), effective September 15, 2020.
What replaced the Section 127(B) IPO tax? #
Nothing replaced it as a standalone tax — shares sold through an IPO and subsequently listed and traded on the Philippine Stock Exchange (PSE) instead fall under the ordinary stock transaction tax under NIRC Section 127(A), the same percentage tax that applies to any sale of PSE-listed shares through the local stock exchange, currently 0.1% of gross selling price under the CMEPA rate cut.
What rates did Section 127(B) charge before it was repealed? #
Before repeal, Section 127(B) taxed the gross selling price of shares sold through an IPO on a sliding scale tied to how much of the company was floated: 4% if up to 25% of outstanding shares were sold, 2% if the proportion sold was over 25% but not over 33 1/3%, and 1% if over 33 1/3% of outstanding shares were sold.
Why was the IPO tax repealed? #
Republic Act No. 11494 repealed Section 127(B) as part of pandemic-era economic relief legislation intended to lower the cost of raising capital through public listing, removing a tax that applied only to the IPO transaction itself and made going public comparatively more expensive than trading already-listed shares.
Does the repeal affect capital gains tax on shares sold outside the stock exchange? #
No. The Section 127(B) repeal is limited to IPO transactions that pass through the local stock exchange listing process. A sale of shares in a closely held corporation that does not occur through an IPO or exchange listing remains subject to the ordinary 15% capital gains tax on net capital gain for unlisted shares, unaffected by Republic Act No. 11494.
Summary #
The IPO-specific percentage tax under NIRC Section 127(B) is gone — repealed by RA No. 11494 effective September 15, 2020, and implemented by RR No. 23-2020, with no sunset or later reinstatement as of 2026. A company going public today faces no equivalent to the old 1%–4% tiered rate on the IPO transaction; its shares, once listed on the PSE, are taxed the same as any other PSE trade under Section 127(A) — currently 0.1% of gross selling price. Anyone relying on older reviewer material, tax outlines, or case studies that still describe the 127(B) rates as current should treat that content as historical background only. See BIR Form 2552 for how that current stock transaction tax is actually filed, and VAT vs. Percentage Tax: Which Applies to Your Business? for how percentage taxes generally fit into the BIR system.