In the Philippine corporate landscape, a corporation may become "inactive"—failing to engage in its primary business purpose for a significant period—without being formally dissolved. When such an entity holds shares listed on the Philippine Stock Exchange (PSE) and decides to liquidate these assets, it must navigate a specific set of tax obligations. Despite its inactive status, the corporation remains a taxable entity under the National Internal Revenue Code (NIRC), as amended, particularly by the TRAIN and CREATE Acts.

The taxation of these transactions depends primarily on the venue of the sale: whether it occurs through the local stock exchange or via a direct "over-the-counter" sale.

1. Sales Through the Local Stock Exchange (PSE)

When an inactive corporation sells shares of a domestic corporation that are listed and traded through the PSE, the transaction is subject to a specific Stock Transaction Tax (STT).

Applicable Rate: Under Section 127(A) of the NIRC, the tax rate is six-tenths of one percent (6/10 of 1%) of the gross selling price or gross value in money of the shares of stock sold.
Nature of the Tax: This is a business tax that serves as a final tax. It is collected and remitted by the stockbroker who executed the trade.
Inactivity Status: The corporation's inactive status does not exempt it from this tax. Since the tax is based on the gross selling price, the corporation's lack of operational income or its "dormant" status is irrelevant to the computation.
Income Tax Exemption: Pursuant to Section 127(D) of the NIRC, any gain derived from the sale of shares of stock where the STT has been paid is exempt from the regular corporate income tax (RCIT).

2. Sales Outside the Stock Exchange (Over-the-Counter)

If the shares are listed on the PSE but the sale is executed outside the trading floor (a direct sale between the inactive corporation and a buyer), the tax treatment shifts significantly to Capital Gains Tax (CGT).

Applicable Rate: Under the CREATE Act, the CGT for domestic corporations on the sale of shares not traded through the stock exchange is a flat rate of fifteen percent (15%) on the net capital gain.
Determination of Gain: The taxable amount is the difference between the selling price (or fair market value, whichever is higher) and the cost basis of the shares.
Fair Market Value (FMV): For shares listed on the PSE, the FMV is generally determined by the closing price on the day of the sale. If no sale occurred on that date, the closing price on the day nearest to the date of sale is used.

3. Documentary Stamp Tax (DST)

Regardless of whether the sale happens on or off the exchange, the transfer of shares triggers Documentary Stamp Tax (DST) under Section 175 of the NIRC.

Rate: The DST is One Peso and Fifty Centavos (P1.50) on each Two hundred pesos (P200), or a fractional part thereof, of the par value of the stock being transferred.
Responsibility: While the law allows parties to agree on who shoulders the DST, in practice, the seller (the inactive corporation) often handles the payment and filing to ensure the BIR issues the necessary Tax Clearance or Certificate Authorizing Registration (CAR).

4. Filing Obligations and the "Inactive" Status

An inactive corporation is still required to maintain its registration with the Bureau of Internal Revenue (BIR). The sale of PSE shares necessitates the following compliance steps:

BIR Form 2000-OT: For DST payments on the transfer of shares.
BIR Form 1707: For Capital Gains Tax (if the sale is made outside the exchange).
Information Returns: Even if the corporation has no operations, the sale of assets must be reflected in its annual financial statements and income tax returns (BIR Form 1702-EX, 1702-MX, or 1702-RT), even if the gain is listed as "exempt" because STT was already paid.

Important Note: Inactive corporations must ensure their "Current/Subscribed" status with the Securities and Exchange Commission (SEC) is managed. If the SEC has revoked the Certificate of Registration due to prolonged inactivity, the corporation may still sell its assets for the purpose of liquidation, but the tax obligations remain enforceable against the remaining corporate assets.

5. Potential Pitfalls: The Value Added Tax (VAT) Question

Generally, the sale of shares of stock is not subject to VAT because it is subject to either STT or CGT. However, if the BIR deems the inactive corporation to be a "dealer in securities," the tax treatment could change. Given that an "inactive" corporation, by definition, is not actively engaged in the business of buying and selling securities, this risk is usually minimal unless the corporation’s Articles of Incorporation suggest otherwise.

Summary of Taxes

Tax Type	Rate	Basis	Venue
Stock Transaction Tax	0.6%	Gross Selling Price	Through PSE
Capital Gains Tax	15%	Net Capital Gain	Outside PSE
Documentary Stamp Tax	P1.50 per P200	Par Value	Both