Capital Gains Tax on Club Shares Transferred Between Nominees: Why RMC No. 72-2026 Says It's Exempt

Revenue Memorandum Circular (RMC) No. 72-2026 confirms that transferring a corporation-owned proprietary club share from an outgoing nominee to a new nominee is not subject to capital gains tax (CGT), because the corporation — not the individual whose name is on the certificate — remains the real, beneficial owner throughout. The circular also removes the old requirement to secure a prior BIR confirmatory ruling before relying on that exemption, letting companies proceed straight to an electronic Certificate Authorizing Registration (eCAR), subject to post-audit verification.

Why company-owned club shares end up in an officer’s name #

Most proprietary clubs — country clubs, business clubs, and similar membership organizations — require membership to be registered in the name of a natural person, not a corporation, even when the company itself pays for and owns the share. That mismatch between who legally holds the membership and who actually owns it is exactly the fact pattern RMC No. 72-2026 addresses.

To work around the natural-person requirement, a corporation typically has the share registered in the name of one of its officers — often a vice president or similarly senior executive — who signs a Declaration of Trust or Trust Agreement acknowledging the share belongs to the company. The officer holds bare legal title for membership purposes only; the corporation is the beneficial owner, pays for the share, and carries it as a corporate asset on its own books.

The complication arises when that officer leaves. Resignation, retirement, or reassignment means the club share can no longer sit under their name, so the company designates a new nominee — typically the incoming officer in a similar role — and the share is re-registered accordingly. RMC No. 72-2026 answers the tax question that substitution raises: does moving the share from one nominee’s name to another’s trigger CGT, as an ordinary share transfer would?

Why the transfer is not subject to capital gains tax #

RMC No. 72-2026 answers that question by looking past the name on the share certificate to who actually owns the share — because the corporation was the beneficial owner before the transfer and remains so after it, nothing has actually been sold, exchanged, or disposed of for CGT purposes. Capital gains tax taxes gain realized on the disposition of a capital asset, and a disposition presumes a real change in ownership. A nominee-to-nominee substitution, where the same corporation holds beneficial title throughout, does not meet that threshold.

As reported in the Philippine News Agency’s coverage of the circular:

“When a title to a proprietary club share is transferred from one nominee to another while beneficial ownership remains with the corporation, the transaction is not considered a sale, exchange, or donation.”

This site relied on secondary news coverage of RMC No. 72-2026 for that description, as the BIR’s own PDF of the circular could not be directly fetched to re-verify the exact operative wording — confirm the precise text against the BIR’s published circular before relying on it for a formal filing position. The exemption is conditioned, not automatic: it applies only where no monetary or non-monetary consideration passes, directly or indirectly, to either nominee. If any benefit changes hands between the two individuals, the arrangement stops looking like a bare nominee substitution and the ordinary CGT rules on unlisted shares — the same 15% final tax regime covered in BIR Form 1707: Capital Gains Tax Return for Sale of Shares of Stock Not Traded on the Stock Exchange — come back into play.

What changed: no more prior BIR ruling required #

Before RMC No. 72-2026, a company generally could not simply treat a nominee-to-nominee club share transfer as CGT-exempt on its own assessment — the safer, and often practically necessary, path was to first secure a confirmatory ruling from the BIR’s Law and Legislative Division before re-registering the share. That meant the transfer sat in limbo while the ruling request worked through the BIR’s queue, even though the underlying facts — same beneficial owner, no consideration — rarely changed from one request to the next.

RMC No. 72-2026 removes that prerequisite for qualifying transactions. A company can now proceed directly to the appropriate Revenue District Office (RDO) to process the electronic Certificate Authorizing Registration (eCAR) for the share transfer, without first waiting on a ruling. In exchange, the BIR keeps authority to conduct post-audit verification — confirming after the fact that the transaction genuinely met the circular’s conditions rather than merely being labeled a nominee substitution to dodge CGT.

This mirrors a broader BIR pattern of trading upfront ruling requirements for after-the-fact audit exposure — the same trade-off Revenue Memorandum Circular No. 19-2022 made for tax-free exchanges under Section 40(C)(2) of the Tax Code; see Tax-Free Exchange Under Section 40(C)(2): Why You No Longer Need a Prior BIR Ruling.

Conditions and documents for the exemption #

The CGT exemption under RMC No. 72-2026 is not a blanket rule for every club share transfer — it applies only where specific conditions are documented, and the company should assemble those documents before approaching the RDO for the eCAR. Based on secondary reporting summarizing the circular’s requirements, the core conditions are:

• The corporation is, and remains, the true beneficial owner of the club share both before and after the transfer.
• The outgoing and incoming individuals hold the share only as nominee or trustee, not in their own right.
• The share is carried and maintained as a corporate asset in the company’s own books of accounts.
• No monetary or non-monetary consideration passes, directly or indirectly, to either the outgoing or incoming nominee in connection with the transfer.

To support an eCAR application on that basis, a company should be prepared to submit:

1. The original Declaration of Trust or Trust Agreement covering the outgoing nominee.
2. A new Declaration of Trust or Trust Agreement covering the incoming nominee.
3. Proof that the corporation paid for the share and carries it as a corporate asset in its books — such as the relevant ledger entry or fixed-asset schedule.
4. A Secretary’s Certificate or Board Resolution confirming that the transfer is without consideration and does not involve any change in beneficial ownership.

Because the exemption turns on facts the company itself controls, the discipline is the same one RMC No. 19-2022 imposes on tax-free exchanges: self-assess carefully and keep the paper trail that would be the first thing reviewed under a post-audit.

Worked example: a VP’s retirement and a new nominee #

Suppose a manufacturing company has held a proprietary share in a business club for over a decade, registered in the name of its outgoing Vice President for Finance, who has served as nominee under a Declaration of Trust since the share was acquired. The company paid the original membership fee and has carried the share as a non-current asset on its balance sheet every year since.

When the VP retires, the company designates the incoming VP for Finance as the new nominee. The two officers, together with the company, execute a new Declaration of Trust naming the incoming VP, while the original Declaration covering the outgoing VP is retained on file. No payment changes hands between the outgoing VP, the incoming VP, or the company — the only thing that changes is whose name sits on the club’s membership records.

The company’s finance and corporate secretary teams assemble both Declarations of Trust, the board resolution confirming the transfer is without consideration, and the books entries showing the share as a corporate asset — then file directly with the RDO for the eCAR, rather than waiting on a ruling request first.

Frequently asked questions #

Is transferring a company’s club share to a new nominee subject to capital gains tax? #

No, if the arrangement qualifies under Revenue Memorandum Circular No. 72-2026. Where a corporation is the actual, beneficial owner of a proprietary club share that is merely registered in the name of an officer as nominee or trustee, a subsequent transfer of that same share to a new nominee — because the former officer resigned, retired, or was replaced — is not subject to capital gains tax, because there is no change in beneficial ownership, only a change of the nominal titleholder.

Do we still need a BIR ruling before transferring a proprietary club share between nominees? #

No. RMC No. 72-2026 removes the prior requirement to secure a BIR confirmatory ruling before treating a qualifying nominee-to-nominee club share transfer as capital-gains-tax-exempt. A company can now proceed directly to securing an electronic Certificate Authorizing Registration (eCAR) at the appropriate Revenue District Office, subject to the BIR’s post-audit verification of the transaction.

What conditions must be met for the CGT exemption under RMC No. 72-2026 to apply? #

The corporation must remain the true beneficial owner of the club share throughout; the outgoing and incoming individuals must hold the share only as nominee or trustee, evidenced by a Declaration of Trust or Trust Agreement; the share must be carried and maintained as a corporate asset in the company’s books; and the transfer must involve no monetary or non-monetary consideration, directly or indirectly, in favor of either the outgoing or incoming nominee.

What documents does a company need to secure the eCAR for this kind of transfer? #

Typical supporting documents include the original Declaration of Trust or Trust Agreement covering the outgoing nominee, a new Declaration of Trust or Trust Agreement covering the incoming nominee, proof that the corporation paid for and carries the share as a corporate asset in its books of accounts, and a Secretary’s Certificate or Board Resolution confirming the transfer is without consideration and does not involve a change in beneficial ownership.

Does RMC No. 72-2026 also cover documentary stamp tax and donor’s tax on the transfer? #

Yes. Because the transfer involves no real change in ownership and no consideration passes between the outgoing and incoming nominee, secondary reporting summarizing RMC No. 72-2026 indicate the BIR’s clarification also extends to documentary stamp tax and donor’s tax, not capital gains tax alone — treating the nominee substitution as outside all three taxes rather than exempt from only one.

What happens if the BIR later finds the nominee arrangement didn’t actually qualify? #

RMC No. 72-2026 replaces the prior-ruling requirement with post-audit verification, not with no oversight at all. If a transaction is later found not to satisfy the circular’s conditions — for example, if consideration actually changed hands, or the corporation was not genuinely the beneficial owner — the BIR retains authority to assess the applicable capital gains tax, documentary stamp tax, donor’s tax, surcharges, and interest as if the exemption had never applied.

Summary #

RMC No. 72-2026 lets a company treat a proprietary club share transfer between nominees as exempt from capital gains tax — and, per secondary reporting, from documentary stamp tax and donor’s tax as well — whenever the corporation remains the genuine beneficial owner throughout and no consideration changes hands, without first waiting on a BIR confirmatory ruling. The trade-off is that the BIR now reviews these transactions after the fact rather than before, so a company relying on the exemption should keep the Declarations of Trust, board authorization, and books entries that would support the position under a post-audit review. For the CGT rules that apply once a club share transfer does involve real consideration or a genuine change in beneficial ownership, see BIR Form 1707: Capital Gains Tax Return for Sale of Shares of Stock Not Traded on the Stock Exchange; for the parallel shift away from prior BIR rulings in a different context, see Tax-Free Exchange Under Section 40(C)(2): Why You No Longer Need a Prior BIR Ruling.