Transferring shares of stock requires a notarized deed of transfer, payment of 15% capital gains tax and documentary stamp tax of ₱1.50 per ₱200 of par value to the BIR, and a BIR eCAR before the corporate secretary can cancel the old certificate and record the new stockholder in the stock and transfer book; the BIR steps typically take anywhere from a couple of weeks to over a month depending on the Revenue District Office.
Transferring shares of stock in a Philippine corporation means signing a notarized deed of transfer, paying capital gains tax and documentary stamp tax to the Bureau of Internal Revenue (BIR), securing an electronic Certificate Authorizing Registration (eCAR), and then having the corporate secretary record the transfer in the stock and transfer book and issue a new certificate. Once the deed is signed, expect the BIR steps and eCAR release to take anywhere from a couple of weeks to well over a month, depending on the Revenue District Office handling your case, with the corporate paperwork afterward moving comparatively fast.
What Makes a Share Transfer Valid and Binding
A sale or assignment of shares is valid between the buyer and seller from the moment they agree, but it is not binding on the corporation or on third parties until two things happen: the stock certificate is properly endorsed and delivered to the transferee, and the transfer is recorded in the corporation’s stock and transfer book. Under the Revised Corporation Code (Republic Act No. 11232), no transfer is valid, except between the parties, until it is entered in the books of the corporation. This is why a private agreement to sell shares, without more, does not make someone a stockholder of record — the corporate books have to be updated, and the BIR tax clearance is what makes that update possible.
Step 1: Check for Restrictions Before You Sign Anything
Before drafting a deed, check the corporation’s articles of incorporation and by-laws for restrictions on share transfers — close corporations, in particular, often carry a right of first refusal in favor of existing stockholders or the corporation itself. Check also for any separate shareholders’ agreement, and confirm the shares being sold are fully paid; transfers of partially paid or unpaid subscriptions typically require the corporation’s consent because unpaid subscriptions remain a corporate receivable. If the corporation operates in a sector with foreign ownership limits, confirm the transfer will not push foreign ownership beyond what the law allows for that industry.
Step 2: Execute a Notarized Deed of Transfer
The transfer itself is documented through a deed of sale, deed of assignment, or deed of donation, depending on the nature of the transaction, signed by both parties and notarized. Notarization is not just a formality here — the BIR will not accept an unnotarized deed when you apply for the tax clearance needed later, so this step effectively gates everything that follows.
Step 3: Pay Capital Gains Tax
For shares that are not listed and traded on the stock exchange, the sale is subject to capital gains tax at a flat rate of 15% on the net capital gain — the difference between the selling price (or fair market value, whichever is higher) and the seller’s cost basis, plus allowable deductible expenses. This is filed and paid through BIR Form 1707, generally within 30 days from the date of the sale or transfer. Where the seller is a dealer in securities, or otherwise holds the shares as an ordinary asset rather than a capital asset, the gain is instead subject to regular income tax rather than the flat capital gains rate, so the seller’s classification matters before assuming which regime applies.
Step 4: Pay Documentary Stamp Tax
Separately from capital gains tax, the sale or transfer of shares of stock is subject to documentary stamp tax (DST) of ₱1.50 for every ₱200, or fractional part, of the par value or actual consideration involved, filed and paid through BIR Form 2000-OT, due on or before the fifth day of the month following the month the deed was signed. This DST on secondary transfers is a different provision from the DST on a corporation’s original issuance of shares, which was reduced to seventy-five percent of one percent (75% of 1%) of par value under the Capital Markets Efficiency Promotion Act, effective July 1, 2025; that same law also exempted sales of shares listed and traded on a local or foreign stock exchange from DST altogether. Most transfers of shares in privately held or closely held corporations, however, are not stock-exchange transactions, so the older per-value DST on secondary transfers still applies to them.
Step 5: Secure the BIR Certificate Authorizing Registration
With the capital gains tax and DST paid, the next step is applying for the eCAR at the Revenue District Office that has jurisdiction over the corporation’s registered address. You will generally need to submit the notarized deed, proof of tax payments and the filed returns, the taxpayer identification numbers of both parties, and copies of the stock certificate and relevant corporate documents. Processing time varies significantly by RDO and by how complete your submission is — some release the eCAR within a couple of weeks, while others, especially where records need to be verified or where there is a backlog, can take considerably longer. Building this variability into your expectations, rather than assuming a fixed number of days, avoids unnecessary frustration.
Step 6: Update the Stock and Transfer Book and Issue a New Certificate
Once the eCAR is released, bring it, along with the deed and the original stock certificate, to the corporate secretary. The corporate secretary cancels the old certificate — marking it cancelled and retaining it on file rather than destroying it — records the transfer details (date, parties, number of shares, and consideration) in the stock and transfer book, and issues a new certificate in the transferee’s name. This is the step that actually makes the transferee a stockholder of record, with the rights that come with that status, such as the right to vote and to receive dividends going forward.
Step 7: Reflect the Change in Corporate Filings
Changes in stockholdings are ultimately reflected in the corporation’s next General Information Sheet (GIS), which is filed with the SEC annually, generally within 30 days from the date of the actual stockholders’ annual meeting. A transfer completed between annual meetings does not usually require an immediate separate SEC filing on its own, but it should be accurately reported the next time the GIS is due, since an outdated GIS misrepresenting who owns the company can create complications later, particularly if the corporation is applying for permits, loans, or is undergoing due diligence for a future transaction.
Special Situations Worth Flagging
- Donations of shares. A transfer made as a gift is subject to donor’s tax rather than capital gains tax, computed and filed differently, so confirm which tax regime actually applies before assuming a straightforward sale procedure.
- Shares inherited through an estate. These pass through the estate settlement process, with estate tax obligations settled first, and the eCAR obtained through that separate track rather than through an ordinary Form 1707 sale filing.
- Treasury or newly issued shares. An original issuance of new shares by the corporation itself, as opposed to an existing stockholder transferring already-issued shares, is taxed differently for DST purposes, so do not assume the per-value secondary-transfer rate automatically applies to every stock certificate change.
- Shares subject to a pledge or other lien. Any existing encumbrance on the shares should be cleared, or at least disclosed and addressed in the deed, since the corporate secretary should not record a clean transfer over shares that remain encumbered.
Why the Paper Trail Matters
It can be tempting, particularly among family-owned or closely held corporations, to treat a share transfer as done once the buyer and seller shake hands and the old certificate changes physical possession. That informal transfer is not enforceable against the corporation or third parties, has no BIR clearance behind it, and leaves the corporation’s books inconsistent with who actually controls the shares. Going through the full sequence — deed, taxes, eCAR, and book entry — is what protects both the buyer’s ownership and the seller’s exit from future disputes over who really owns the stock.
Frequently Asked Questions
How long does a share transfer take from signing to a new certificate? Expect roughly a couple of weeks to over a month for BIR tax payments and eCAR issuance, depending heavily on the Revenue District Office; recording the transfer in the stock and transfer book and issuing a new certificate is comparatively fast once the eCAR is in hand.
Who pays the capital gains tax and DST, the buyer or the seller? Capital gains tax is legally the seller’s liability since it taxes the seller’s gain, while documentary stamp tax attaches to the document itself and can be pursued from either party by the BIR, so the deed of transfer should specify who shoulders each tax.
Do all share transfers need BIR clearance? Yes. Transfers of shares not traded on the stock exchange need a BIR eCAR before the corporation can validly record the transfer in its books and issue a new stock certificate.
Can shares be transferred without a notarized deed? No. The BIR will not process the capital gains tax and DST filings needed for the eCAR without a notarized deed of transfer, so notarization is a required step, not an optional formality.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.