Tax Updates July 2022 (SyCipLaw Tax Issues And Practical Solutions (T.I.P.S) Vol. 18)

1. Is the stock transaction tax an income tax? If yes, will the exclusion from gross income under Section 32(B)(7)(a) of the Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code, as amended, apply to the stock transaction tax?

No. The stock transaction tax is not an income tax but a percentage tax. The exclusion from gross income under Section 32(B)(7)(a) of the NIRC applies only to income tax under Title II of the National Internal Revenue Code, as amended (NIRC). Its application cannot be extended to Title V on Other Percentage Taxes. In IFC Capitalization (Equity) Fund, L.P. v. Commissioner of Internal Revenue (G.R. No. 256973, November 15, 2021), the Supreme Court highlighted the following differences between the stock transaction tax and income tax: (1) stock transaction tax is found under Title V of the NIRC on Other Percentage Taxes, while income tax is found under Title II; and (2) a percentage tax is a national tax