In times of need, we opted to come together to support one another through acts of kindness and generosity. One such act is through donation. This act of giving, whether to donate cash, goods, or time, can transform lives and communities. Many entities participate in charitable contributions that align with their corporate social responsibilities (CSRs). One of these is to donate stock to charity. Share of stock donation involves transferring ownership of stocks or securities to charitable organizations, in other words, giving your share of stock as a gift. An individual can donate shares or give stock directly to charity. Many donors are choosing to give shares of stock because it comes with benefits. Here are the common reasons why individuals or companies choose to make charitable donations by donating shares of stock.
1. Tax Benefits
There are two tax benefits of donating stock. By donating appreciated stock, donors can potentially avoid capital gains tax and allow you to claim a tax deduction for the fair market value of the stock. Donors may reduce concentrated stock positions or rebalance their portfolio of stocks without incurring a major tax liability. Make sure the shares are in long-term capital gains which are shares that have been held for at least a year.
2. Maximize Impact
One of the reasons to donate stock is that it enables donors to leverage their investments for social good. Because the money you would have paid in taxes can instead go fully to the nonprofit organization.
3. Quick and Easy
Donation of stock doesn’t have to be as difficult or stressful as many people believe. You can easily accomplish this by obtaining from your charity the necessary stock transfer information, filling it out, and sending it to the brokerage firm that is in charge of your stocks. Moreover, there are service providers that can start the stock on your behalf.
Donors Tax (DST)
Republic Act 10963 or The Train Law simplifies the donor’s tax schedule with rates ranging from 2% to 15% to a single rare of 6% of total gifts in excess of P250,000.00.
Donor’s Tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. It shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible.
Properties such as shares of stocks, the fair market value shall depend on whether the shares are listed or unlisted in the stock exchanges. Unlisted common shares are valued based on their book value while unlisted preferred shares are valued at par value. In determining the book value of common shares, appraisal surplus shall not be considered as well as the value assigned to preferred shares, if there are any. On this note, the valuation of unlisted shares shall be exempt from the provisions of RR No. 6-2013, as amended.
For shares which are listed in the stock exchanges, the fair market value shall be the arithmetic mean between the highest and lowest quotation at a date nearest the date of donation, if none is available on the date of donation.
The Commissioner of Internal Revenue has issued Revenue Memorandum Circular (RMC) No. 6-2022 to clarify the Documentary Stamp Tax (DST) imposed pursuant to Section 175 of the 1997 Tax Code, as amended, on the transfer of shares of stock. Generally, Section 175 imposes DST on secondary transfers of shares of stock at the rate of one peso and fifty centavos (PHP1.50) on each PHP200, or fractional part thereof, of the par value of stock transferred.
The RMC No. 6-2022 has clarified that the following transfers of shares of stock shall also be subject to DST under Section 175:
- Transfer pursuant to a Deed of Donation;
- Transfer pursuant to a Will of the Decedent as approved by the probate court in a Judicial Settlement of Estate; and,
- In the absence of a Will, Judicial Settlement of Estate as approved by the probate court or Extra-Judicial Settlement of Estate, where an heir specifically waives or renounces his or her share over the inheritance, and the waived or renounced shares are transferred to another heir.
BIR eCAR processing, however, would still be necessary to completely transfer the shares. See our explanation here.
Need further information and assistance in Donating shares of stocks? Talk to our team at FILEDOCSPHIL to know more about the requirements and process. Call us today at (+63) 917 149 2337 or send an email to info@filedocsphil.comor simply message us through the live chat for more information.
