RMC No. 143-2022

RMC No. 143-2022 clarifies the implementation of RR No. 13-2022 on the income tax treatment of equity-based compensation. RR No. 13-2022 took effect October 29, 2022 and applies prospectively. Exercises or availments on or after that date are treated as compensation subject to withholding tax on compensation, whether the employee is rank-and-file or managerial/supervisory. No CGT and no DST arise upon grant; DST is imposed only upon actual issuance of shares. Sale, barter, or exchange by the employee-grantee is treated as a sale of stocks not listed on the stock exchange and is subject to CGT under Section 24(C) of the Tax Code; transfers without consideration are treated as donations subject to donor's tax. The excess of the higher of book value/FMV of the shares at exercise over the price fixed on the grant date is additional compensation subject to income tax and withholding tax on compensation. Employers must file BIR Forms 1601-C, 1604-C and 2316 starting November 2022 for exercises starting October 29, 2022; Forms 1603Q, 1604-F and 2306 apply to pre-effectivity exercises by managerial or supervisory grantees. Employers must also submit a sworn statement to the RDO within 30 days from grant and file a report on or before the 10th day of the month following the month of exercise.