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Can the BIR know your Phil. stock market investments?

What if you become successful in stock market investing and your investments was able to gain a lot several times more. Would the BIR know how much you have then in your stock account? I'm afraid this could lead to some "extortion" activities... Anybody wanna share their thoughts?

Comments

  • KuyaDannyKuyaDanny Moderator PEx Moderator
    Your stock broker gets your TIN when you open an account. Every time you receive a cash dividend, tax is withheld. Every time you sell a stock, a transaction tax is deducted and remitted to the BIR. When these payments are made, reports are sent to the BIR, along with your name and TIN.

    So, YES, the BIR has information about your stock market investments.

    But, so what? As long as you pay the correct taxes, you should have nothing to worry about.
  • So alam pala nila. Was there any news already of some investor being called up by the BIR to explain why he has a large amount of money in his stock market account?
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    I have not heard any.

    If your money is already in stocks, and most of it is a result of gains/price appreciation, that is explainable if you are ever audited by the BIR.

    What one should be more worried about, I think, is if he invests a large amount of new money (cash) in stocks. He better have a credible explanation of the source of that cash.
  • oic, thanks KuyaDanny!
  • AgapitoAgapito PEx Influencer ⭐⭐⭐
    The profits you earn from selling shares in the stock market, are NOT income tax, but CAPITAL GAINS tax. Therefore, you do not need to file any income tax from these profits.

    The capital gains tax is automatically deducted by your stock broker from the proceeds of the selling of your shares. Meaning, before you get your money from the sale, the tax has already been deducted from it. So no need to worry about not paying the capital gains tax. If ever the capital gains tax was not deducted, your stock broker is accountable for that.

    Normally, stock brokers do not question their clients when they deposit money into their account and use that money to buy shares.

    But stock brokers and individual companies are required to send a list of all the names of shareholders of a company to the Securities and Exchange Commission. It is up to the SEC to scan the list and scrutinize the background of shareholders. But normally, they only focus on shareholders with very large number of shares. They don't bother with individual traders who buy and sell shares on the short term.

    As far as i know, money held in stocks are assets that are not taxable as it is (just like you are not paying any tax by simply owning & holding precious jewelry or Picasso paintings). You are only taxed when you sell the shares. But not when you are "holding" them.

    This is the reason why many billionaires are not listed as Top Taxpayers in any given country. Their wealth are sitting in stocks. As long as you don't sell those shares, then you don't pay tax on those wealth (rules may vary from different countries).

    Of course, when the list of names of shareholders are sent to the SEC, the SEC can share this list to the BIR. It is up to the BIR to examine your lifestyle and your source of income to verify how you obtained the money to buy so many shares.
  • Agapito, thanks for sharing. I would just like to ask if you sell your shares, there would be taxes, and would the broker submit then your name and TIN to the BIR when reporting the said transactions?
  • KuyaDanny wrote: »
    I have not heard any.

    What one should be more worried about, I think, is if he invests a large amount of new money (cash) in stocks. He better have a credible explanation of the source of that cash.


    As long as hindi galing sa gambling, nakaw, or corruption, or illegal, KuyaDanny okay ba na excuse na binigyan ako ng pera ng unmarried aunt ko para tulungan niya ako magka-income which is totoo naman e, or my friends pooled money for me and used my account?
  • AgapitoAgapito PEx Influencer ⭐⭐⭐
    Athrunzala wrote: »
    I would just like to ask if you sell your shares, there would be taxes, and would the broker submit then your name and TIN to the BIR when reporting the said transactions?
    I am not privy to back-end stock brokerage operations, but your official sales receipt for the shares you sold should reflect the amount of capital gains tax deducted from your proceeds. The sales receipt is proof that you paid your tax on the sale. You most likely do not need to worry how it is remitted back to the BIR.

    Dividends however, are taxable income. You have to declare that as income tax.


    Athrunzala wrote: »
    As long as hindi galing sa gambling, nakaw, or corruption, or illegal, KuyaDanny okay ba na excuse na binigyan ako ng pera ng unmarried aunt ko para tulungan niya ako magka-income which is totoo naman e, or my friends pooled money for me and used my account?
    Here's my unsolicited answer to this -

    Yes, that is perfectly fine.

    The last time i heard the SEC sent private investigators to check individual shareholders was when it was reported to their attention that some stock traders are conniving with each other to manipulate stock market prices.

    Unless you are trading by the tens of millions of pesos worth of shares enough to disrupt the stock exchange, they probably will not bother with you.

    Also, movement of money can be detected by the BIR in other ways. The banks normally would report to the authorities any abnormal movement of money in bank accounts under them. If somebody would investigate you, bank officials will most likely be the first ones to call you up and ask where you got the money in your account.
  • Agapito wrote: »
    Dividends however, are taxable income. You have to declare that as income tax.

    Huh? Sabi ni KuyaDanny "Every time you receive a cash dividend, tax is withheld." Hindi ba double taxation ito kasi automatically na deduct na ng stockbroker mo yung 10% witholding tax before you receive it, tapos may income tax pa?
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    Athrunzala wrote: »
    KuyaDanny okay ba na excuse na binigyan ako ng pera ng unmarried aunt ko para tulungan niya ako magka-income which is totoo naman e, or my friends pooled money for me and used my account?

    Binigyan ka ng pera na ginawa mong puhunan sa stock investing?

    That could be construed as a gift/donation, and subject to donor's tax. Your aunt could be liable, if the amount of donation to you exceeds P100,000 in a calendar year.
  • haha! 100,000 pala ang max!
  • AgapitoAgapito PEx Influencer ⭐⭐⭐
    Athrunzala wrote: »
    Huh? Sabi ni KuyaDanny "Every time you receive a cash dividend, tax is withheld." Hindi ba double taxation ito kasi automatically na deduct na ng stockbroker mo yung 10% witholding tax before you receive it, tapos may income tax pa?
    Yes, what i meant was the tax withheld was your income tax.

    I was told before that if your income tax was already withheld by a third-party, you do not need to file the paperworks.

    I am not an authority on taxation, so treat my input as just an fyi. I am speaking from my own experience. I have been trading stocks for more than 20 years now.

    Regarding the Donor's Tax, you can skirt this by opening an account in your Aunt's name and have her money deposited in that account. Donor's tax can be vague and disputable. Unless Jinggoy Estrada or Napoles is one of your friends, you probably need not worry much about it.
  • nice thanks too Agapito!
  • peternato10peternato10 PEx Veteran ⭐⭐
    pwede mo naman sabihin na inutang mo ang money at isosoli ulit yung pera.

    dapat tanggalin na yang donors tax baket ang mga religious organization hindi sinisingil ng donors tax?
    Athrunzala wrote: »
    As long as hindi galing sa gambling, nakaw, or corruption, or illegal, KuyaDanny okay ba na excuse na binigyan ako ng pera ng unmarried aunt ko para tulungan niya ako magka-income which is totoo naman e, or my friends pooled money for me and used my account?
  • markapinyamarkapinya PEx Rookie ⭐
    I think in principle, we are already paying more than our fair share of taxes for the dividends we receive. Kasi kung tutuusin, those dividends are from the company's income that have already been taxed at corporate tax rates. So nagiging double taxation. I think in some countries, like Australia, the taxes withheld on dividends can be used as tax credits when you file your income tax (franking credits?).

    I also remember years ago there was this move by Kim H to include dividends dun sa annual income tax form but for information purposes only (since withheld at source na nga siya, just like interest earned from banks). Pero di tinuloy. (I guess target siguro nila are the non-pse transactions, kasi sa pse nasa kanila na naman ang info)
  • markapinyamarkapinya PEx Rookie ⭐
    To those who hold PLDT (TEL) shares, me natanggap din ba kayong notice from your broker that you have to submit identification documents para sa HSBC Stock Transfer. Otherwise, they will deduct 25% tax from your dividends (di lang 10%). Tapos yung deadline is March 31 na daw.

    As what Kuya Danny said in another post, it seems BIR is really moving now to full disclosure.
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    I have not received anything from my broker, and I own PLDT shares.

    If you used a Philippine passport as the ID when you opened your brokerage account, that is documentation that you are a Filipino citizen and therefore taxable at 10%. No other evidence is needed.

    25% dividend tax is applicable to "nonresident aliens not engaged in trade or business".
  • markapinyamarkapinya PEx Rookie ⭐
    KD, here's what I received. (Can't remember what I used as ID when I opened my account (baka nag-expire na). But curiously, the email says at then end: Filipino Citizen - 25%)....

    Dear xxxx,
    *
    Good Day!
    *
    In accordance with the requirements of Philippine Tax Laws, PLDT is updating its stockholders’ records for purposes of withholding taxes on cash dividends. Accordingly, all stockholders are required to submit the following documentary requirements to HSBC Stock Transfer on or before March 30, 2014:
    *
    FILIPINO CITIZEN
    Photocopy of any of the following:
    1)**** SSS
    2)**** Unified Multipurpose ID
    3)**** valid Philippine passport; or
    4)**** valid Philippine driver’s license;
    *
    [SNIP]

    In the absence of the said documents, PLDT shall be constrained to apply the maximum tax rate as indicated below:
    *
    Domestic corporation-*** 30%
    Filipino citizen-************* 25%
    Resident alien-************** 25%
    *
    *
    Best Regards,
    *
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    Yes, the company is being safe, by applying the HIGHEST TAX RATE possible unless you can prove that you qualify for a lower one.

    So go ahead and send a copy of your passport, SSS, or driver's license to avoid inconvenience. There's a big dividend payment (P87.00 per share) next month.
  • ***** ko lang nalaman about sa tax na to. thank you for this. Akala ko wala naman masyadong gagawin sa tin number, nagrereport pala. Im working abroad.
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