G.R. No.

210987               November 24, 2014

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY (Philamlife)
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL
REVENUE, Respondents.

Facts:
Philamlife used to own shares in Philam Care Health Systems, Inc. (PhilamCare). In a bid to divest
itself of its interests in the said health maintenance organization industry, it offered to sell its
shareholdings therein through a competitive bidding. The shares were sold to STI Investments, Inc.
based on the prevailing exchange rate at the time of the sale. The CIR has determined that it has to
pay donor’s tax as the selling price of the shares was sold lower than their book value based on the
financial statements of Philamcare. Philamlife appeals the ruling saying it lacks donative intent in the
transaction.

Issue:
Whether or not the price difference in Philamlife’s sale of shares in PhilamCare is subject to donor’s
tax.

Held:
Yes, the price difference in Philamlife’s sale of shares in PhilamCare is subject to donor’s tax. The
absence of donative intent, if that be the case, does not exempt the sales of stock transaction from
donor's tax since the Tax Code categorically states that the amount by which the fair market value of
the property exceeded the value of the consideration shall be deemed a gift. Thus, even if there is
no actual donation, the difference in price is considered a donation by fiction of law.