A Non-Resident Foreign Corporation (NRFC) is a foreign entity not engaged in trade or business within the Philippines, receiving income from Philippine sources. Under the National Internal Revenue Code (NIRC) of 1997, as amended by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the taxation of capital asset disposals by NRFCs depends strictly on the nature of the asset and the application of international tax treaties.

I. General Taxation Framework

The default tax treatment for an NRFC is a final withholding tax of 25% on the gross income received during each taxable year from all sources within the Philippines. This rate applies to "fixed or determinable, annual or periodical" income, which includes gains from the sale of capital assets, unless a specific tax rate or exemption applies under the NIRC or a tax treaty.

II. Specific Rules for Shares of Stock

When an NRFC sells, barters, exchanges, or disposes of shares of stock in a domestic corporation, the tax treatment depends on where the transaction occurs:

Shares Traded Through the Local Stock Exchange (LSE): The transaction is subject to a Stock Transaction Tax of six-tenths of one percent (0.6%) of the gross selling price or gross value in money. This is a business tax paid in lieu of income tax.
Shares Not Traded Through the Local Stock Exchange: The net capital gains realized by an NRFC from the sale of shares in a domestic corporation are subject to a Capital Gains Tax (CGT) of 15%.
Determination of Gain: The gain is calculated by deducting the cost of the shares (and any allowable expenses) from the selling price.
Fair Market Value (FMV): For tax purposes, the selling price cannot be lower than the FMV. For unlisted common shares, the FMV is based on the book value per the latest audited financial statements. For unlisted preferred shares, the FMV is the par value.

III. Sale of Real Property

The sale of real property located in the Philippines by an NRFC is generally subject to a 6% Capital Gains Tax based on the gross selling price or the current Fair Market Value (Zonal Value), whichever is higher.

However, it is critical to distinguish if the property is a "capital asset" or an "ordinary asset."

If the NRFC is not engaged in the real estate business, the property is a capital asset.
If the property is used in business (rare for an NRFC by definition), it would be an ordinary asset subject to the 25% corporate rate.

IV. Other Capital Assets

For the sale of other capital assets (e.g., machinery, equipment, or intangible assets like patents or copyrights located in the Philippines), the gain is subject to the 25% Final Withholding Tax on the net capital gain. The buyer or payor is typically constituted as the withholding agent responsible for remitting the tax to the Bureau of Internal Revenue (BIR).

V. Impact of Double Taxation Agreements (DTAs)

The Philippines has an extensive network of tax treaties that may reduce or eliminate the tax liability of an NRFC.

Capital Gains Exemption: Many treaties (such as those with the US, Japan, or Germany) provide that gains from the alienation of shares or other personal property are taxable only in the country where the seller is a resident (the home country of the NRFC).
The "Land-Rich" Exception: Most treaties contain a provision where the Philippines retains the right to tax the sale of shares if the assets of the domestic corporation consist principally (usually more than 50%) of real property situated in the Philippines.
Administrative Requirement: To avail of treaty benefits, the NRFC must file a Tax Treaty Relief Application (TTRA) or a Request for Confirmation with the BIR’s International Tax Affairs Division (ITAD) before the deadline prescribed by current regulations.

VI. Documentary Stamp Tax (DST)

In addition to income or capital gains taxes, the transfer of Philippine assets triggers DST:

Shares of Stock: PHP 1.50 on each PHP 200.00, or fractional part thereof, of the par value of such stock. In the case of stock without par value, the amount is equivalent to 50% of the DST paid upon the original issue of said stock.
Real Property: PHP 15.00 for every PHP 1,000.00 of the consideration or value.

VII. Compliance and Certification

The transfer of ownership in the books of a corporation (for shares) or with the Register of Deeds (for real property) cannot be processed without a Certificate Authorizing Registration (CAR) issued by the BIR. The CAR is issued only upon proof that the appropriate CGT, DST, and other taxes have been fully paid.

Failure to comply with these obligations subjects the NRFC to interest, a 25% to 50% surcharge, and compromise penalties. Since the NRFC is outside Philippine jurisdiction, the BIR holds the local payor or the domestic corporation (whose shares are being sold) accountable through the withholding tax system.