DOCUMENTARY STAMP TAXI. In General

What is Documentary stamp tax (DST)? It is a tax on documents, instruments and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right, or property thereto.A documentary stamp tax is in the nature of an excise or privilege tax because it is really imposed on the privilege to enter into a transaction rather on document. In Commissioner v. Herald lumber co. (119 Phil 647), the court described Documentary Stamp Tax as an Excise upon the facility used in the transaction of the Business separate and apart from the business itself; In Michel J. Lhuillier Pawnshop, Inc. v. CIR (G.R. No. 166786, May 3, 2006), the court also describes DST where it states that in general, documentary stamp taxes are levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments. Examples of such privileges, the exercise of which, as effected through the issuance of particular documents, are subject to the payment of documentary stamp taxes are leases of lands, mortgages, pledges and trusts, and conveyances of real propertyTherefore, as provided by the National Internal Revenue Code (NIRC), sec. 173 it describes DST, to wit:Section 173.Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers. Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the samewherever the document is made, signed, issued, accepted, or transferredwhen the obligation or right arises from Philippine sources or the property is situated in the Philippines,and the same time such act is done or transaction had:Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax.Ergo, Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. It is in the nature of an excise tax because it is imposed upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. It is an excise upon the facilities used in the transaction of the business distinct and separate from the business itself.II. Transactions/Documents Subject to DSTA. Original Issuance of shares On every original issue whether an organization, reorganization, or for any lawful purpose, of shares of stock by any association, company, or corporation, the rules as provided by R.A. 9243 are as follows:

a. No documentary stamp tax is due upon certificates of stock issued to replace prior or original certificates are issued to the same person and the tax has been paid on the original issue.

b. R.A. No. 8424 amended Section 175 (now 174) by substituting shares for certificates so that now the tax is imposed no longer on the original issue of certificates of stocks but of shares of stock.

c. The DST accrues at the time the shares are issued. Issuance means that point at which the stockholder acquires and may exercise attributes of ownership over the stock.

d. It is actually the transaction or the privilege to enter into a transaction evidenced by the document or instrument on which the documentary stamp tax is imposed but in the absence of the document or instrument there is nothing to which the documentary stamp can be affixed.In lieu of the foregoing, the tax may be paid either through purchase and actual affixture, or by imprinting the stamps through a documentary stamp metering machine on the taxable document. Our Supreme Court further held that under Section 175, the certificate only need to be issued but not delivered, actually or constructively, for the DST to attach. But if the certificate issued is subject to a suspensive condition, it shall be liable to tax only when released from said condition for then and only then shall it truly acquire any practical value to its owner and be considered as originally issued.R.A. 9243 also provided the tax rates of original issuance of shares, to wit:a. On shares of stocks with par value on each P200.00, or fractional part thereof, of the par value of such shares P1.00, regardless of the consideration paid by the stockholders.

b. On shares of stock without par value, the amount of the tax is based on actual consideration received for the issuance of such stock. Any additional consideration which may be received for the certificates in the future is of no consequence.c. On stock dividends, the amount of the tax is based on the actual value (or book value) represented by each share.

R.A. No. 9243 reduces the rate of tax on the original issue of shares from P2.00 to P1.00 for every P200.0 or a fractional part thereof, of par value. It repeals Section 174 (Stamp Tax on Debentures and Certificates of Indebtedness), adds Section 180 (Stamp Tax on All Bills of Exchange or Drafts), amends Section 175, 176, 180, 183, 186, and 199, and then renumbers formers Sections 175 to 180 as Sections 174 to 179, respectively.

If the certificate issued is subject to a suspensive condition, it shall be liable to tax only when released from said condition for then and only then shall it truly acquire any practical value to its owner and be considered as originally issued.B. Transfer of sharesOn transfers of shares, the rules as provided by Sec. 175 of the NIRC and amended by R.A. 9243 are the following, to wit:a. Documents taxable All sales, or agreements to sell, or memoranda of sales, or deliveries, or transfer of shares of stock, in any association, company, or corporation, or transfer of such securities by assignment in blank, or by delivery, or by any paper, or agreement or memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the benefit f such stock, or to secure the future payment of money, or for the future transfer of any stock.

b. Accrual of tax The tax accrues at the time of making the sale or agreement to sell or memorandum of sale, or delivery of or transfer of the legal title of stock, or of the right to subscribe for or to receive such stocks, regardless of the time or manner of the delivery of the certificate or memorandum of sale.

c. Transfer by operation of law A transfer of certificates of stock by operation of law as in the case of intestate succession is not subject to the tax.

d. Nature of transfer If the legal and beneficial title remains with the owner of the certificate of stock, the transfer is exempt from tax.

In the case of Compagnie Financiere Sucres et Deneres v. CIR (G.R. No. 133834, Aug. 28,2006) the court ruled that tax refunds are a derogation of the States taxing power. Hence, like tax exemptions, they are construed strictly against the taxpayer and liberally in favor of the State.Consequently, he who claims a refund or exemption from taxes has the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted.Significantly, petitioner cannot point to any specific provision of the National Internal Revenue Code authorizing its claim for an exemption or refund.Rather, Section 176 of the National Internal Revenue Code applicable to the issue provides that the future transfer of shares of stocks is subject to documentary stamp tax, thus:SEC. 176.Stamp tax on sales, agreements to sell, memoranda of sales, deliveries or transfer of due-bills, certificates of obligation, or shares or certificates of stock.On all sales, or agreements to sell, or memoranda of sales, or deliveries, or transfer of due-bills, certificates of obligation, or shares or certificates of stock in any association, company, or corporation, or transfer of such securities by assignment in blank, or by delivery, or by any paper or agreement, or memorandum or other evidences of transfer or salewhether entitling the holder in any manner to the benefit of such due bills, certificates of obligation or stock, or to secure the future payment of money,or for the future transfer of any due-bill, certificates of obligation or stock, there shall be collected a documentary stamp tax of fifty centavos (P1.50) on each two hundred pesos(P200.00), or fractional part thereof, of the par value of such due-bill, certificates of obligation or stock:Provided, That only one tax shall be collected on each sale or transfer of stock or securities from one person to another,regardless of whether or not a certificate of stock or obligation is issued, indorsed, or delivered in pursuance of such sale or transfer; andProvided, further,That in case of stock without par value the amount of the documentary stamp tax herein prescribed shall be equivalent to twenty-fivepercentum(25%) of the documentary stamp tax paid upon the original issue of the said stock. (Emphasis supplied).Clearly, under the above provision, sales to secure the future transfer of due-bills, certificates of obligation or certificates of stock are liable for documentary stamp tax.No exemption from such payment of documentary stamp tax is specified therein.Petitioner contends that the assignment of its deposits on stock subscription is not subject to capital gains tax because there is no gain to speak of.In the Capital Gains Tax Return on Stock Transaction, which petitioner filed with the Bureau of Internal Revenue, the acquisition cost of the shares it sold, including the stock subscription isP69,143,630.28. The transfer price to Kerry Holdings, Ltd. isP70,332,869.92.Obviously, petitioner has a net gain in the amount ofP1,189,239.64.As the CTA aptly ruled,atax on the profit of sale on net capital gain is the very essence of the net capital gains tax law. To hold otherwise will ineluctably deprive the government of its due and unduly set free from tax liability persons who profited from said transactions.Furthermore, the tax basis and rates are as follows:a. On each P200.00 or fractional part thereof, of the par value of such stock P0.75b. Only one tax shall be collected on each sale or transfer of stock from one person to another regardless of whether or not a certificate of stock is issued, indorsed or delivered in pursuance of such sale, or transfer.c. In the case of stock without par value, the amount of the tax shall be equivalent to 25% of the documentary stamp tax paid upon the original issue of said stock. C. Foreign-Issued Bonds, Debentures, Shares or Certificates of Indebtedness, and Other InstrumentsUnder Section 176 of the NIRC, the following documents are taxable even if issued in a foreign country:a. Bond- is an obligation in writing binding the obligor to pay a sum of money to the obligee.

b. Debenture- is a simple acknowledgement of a debt.

c. Certificate of stock- is a written instrument signed by the proper officer of an association, company or corporation, stating or acknowledging that the person named therein is the owner of a designated no. of shares of its stock.

d. Certificate of indebtedness- is an instrument having the general character of investment securities issued by a corporation as distinguished from an instrument evidencing debts arising in ordinary transactions between individuals.

They are taxable if issued, sold, or transferred within the Philippines.

D. Issue and Transfer of Certificate of Interest in Property or Accumulations

Under Sec. 177 of the NIRC, the following documents are taxable, to wit:

a. All certificates of profits or any certificate or memorandum showing interest in the property or accumulations of any association, company or corporation;

b. All transfers of such certificates or memoranda;

c. Sales of participation in a partnership are subject to tax because they are considered accumulations of associations, companies, or corporations;

d. Coupons detached to certificates of stock are certificates of profits and at maturity, or when detached should each beat the stamp.e. Business property investment bond. The basis of the tax rate imposed is that on each P200.00 or fractional part thereof, of the face value of such certificate or memorandum P0.50.

E. Bank Checks, Drafts, Certificates of Deposit not Bearing InterestFor Bank Checks, certificates of deposit not bearing instrument to be taxable under sec. 178 of the NIRC, it should be an inland bank checks, drafts, or certificates of deposit not drawing interest, or orders for the payment of any sum of money drawn upon or issued by any bank, trust company, or any person/s companies or corporations at sight or on demand; furthermore the tax rate is pegged at P1.50 for each such instrument.

F. Debt InstrumentsUnder sec. 179 of the NIRC, every original issue of debt instruments is subject to documentary stamp tax.What is debt instrument? Debt instrument shall mean instruments representing borrowing and lending transactions including but not limited to:a. Debentures;b. Certificates of indebtedness;c. Due billsd. Bondse. Loan agreements;f. Instruments and securities;g. Deposit substitute debts instruments;h. Certificate or other evidences of deposit that are either drawing interest significantly higher than the regular deposit;i. Certificate or other evidences of deposits drawing interest and having a specific maturity date;j. Orders of payment of any sum of moneyk. Promissory notes (negotiable or not)

The basis and tax rate of debt instrument is that:a. On each P200.00, or fractional part thereof, of the issue price of any such debt instruments draft, certificate of deposit, or note P1.00;b. For such debt instruments with terms of less than 1year, the documentary stamp tax to be collected shall be of a proportional amount in accordance with the ratio of its terms in number of days to 365 days;c. Only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan.

If the debt instrument has a term of less than 1year, the DST shall be computed taking into consideration the number of days that the instrument is outstanding as a fraction of 365 days. If the debt instrument has a term of 1year or longer, the DST shall be computed based on the issue price of the debt instrument.

In the case of Belle Corp. v. CIR, CTA Case No. 6156, June 17, 2005, the court ruled that Inter-company advances are not considered as debts which is subject to DST, the decision is stated herein, to wit:

"Based on our review of the supporting documentspresented to us, we were able to ascertain that the company'sadvances to its subsidiaries and affiliates for the year 1997amounting to P23,395,372,092.89 were not documented in anyform of a promissory note, nor a certificate of indebtedness ora certificate of obligation issued by the respective subsidiariesand affiliates. The said advances were only evidenced bydisbursement vouchers, journal voucher and inter-officememoranda issued by the Company."

Promissory note is defined as an unconditional promise in writing byone person to another signed by the maker engaging to pay on demand or ata fixed or determinable future time, a sum certain in money to such other person or to order or to bearer, free from restrictions as to registration or transfer and usually without coupons. Similarly, a promissory note refers to an instrument, whether negotiable or non-negotiable, whereby the maker agrees to pay a sum certain in money or its equivalent at a definite time. Thus, from the foregoing, We do not agree with the respondent that the inter-company advances evidenced by interoffice memorandum, vouchers, or board resolutions are in the nature of a promissory note. The definition is clear, and when the law speaks in clear and categorical language, there is no room for interpretation, but only application. There is nothing in Section 180 that clearly and expressly declares inter-office memoranda covering inter-company advances made by petitioner as subject to the documentary stamp tax therein.

G. Bills of Exchange or Drafts

All bills of exchange between points within the Philippines or drafts are taxable as provided in Sec. 180 of the NIRC as amended by R.A. 9243.

The tax rate is imposed on each P200.00 or fractional part thereof, of the face value of any such bill of exchange or draft or P0.30. Section 180 is intended to complement the DST imposed on all foreign bills exchange which are drawn in but payable out of the Philippines under Sec. 182. Any bill of exchange or order for the payment of money purporting to be drawn in a foreign country but payable in the Philippines whether at sight or on demand or after a specified time. Note that Section 178 applies only to inland checks, etc.

H. Acceptance of Foreign-Drawn Bills of Exchange

Upon any acceptance or payment of any bill of exchange or order for the payment of money purporting to be drawn in a foreign country but payable in the Philippines, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such bill of exchange, or order, or the Philippine equivalent of such value, if expressed in foreign currency. (sec. 181, NIRC)

I. Foreign Bills of Exchange and LCAll foreign bills of exchange and letters of credit drawn in but payable out of the Philippines in a set of three or more according to the custom of merchants and bankers, and regardless of the fact that they drawn in duplicate shall be subject to DST. (Sec. 182, NIRC)

What is a foreign bill?A foreign bill of exchange is one where the drawer and the drawee are residents of countries foreign to each other.

What is a letter of credit?It is that issued by one merchant to another for the purpose of attending to a commercial transaction.

Section 182 applies to foreign transactions while section 192 applies to domestic transactions.

J. Life Insurance Policies All policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives is taxable (sec. 183, NIRC).

The tax accrues upon the perfection of the contract. Insurance policies are issued in the place where it is delivered to the person insured. The tax rate is imposed on each P200.00, or fractional part thereof, of the amount of premium collected or P0.50. The former tax base is amount insured by any such policy. The tax is collectible not only on the original policy but also upon renewals.

K. Non-Life Insurance Policies

All policies of insurance, or other instruments by whatever name the same may be called, by which insurance shall be made or renewed upon property of any description, including rents or profits, against peril by sea or on invalid waters, or by fire or lightning is taxable ( sec. 184, NIRC)

No tax is due on reinsurance contracts.

Who are liable for the tax?The insurer, the agent or sub-agent, or broker effecting, accepting, placing or soliciting the insurance and also the insured.

The tax rate is imposed on each P 4.00, or fractional part thereof, of the amount of the premium charged or P0.50. Insurance contract issued by a branch in a foreign country, being in the nature of property insurance covering properties outside the Philippines are not subject to DST (BIR Ruling No. DA-288-2005dated June 27, 2005).

i.e. In the case of the Philippine corporations branch in Hong Kong, the property insurancepolicies issued by the said Hong Kong branch will be subject to DST imposed under Section 14 of the Tax Code, even if such policies are signed or issued abroad, for as long as the properties which are the object of insurance are situated in the Philippines. Conversely, where the property is situated outside the Philippines, the DST imposed on property insurance under Section 184 will not apply.

L. Fidelity Bonds and Other Insurance Policies

The following are taxable as provided by sec. 185 of the NIRC, to wit:

a. All policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person company, etc.

b. All bonds undertakings or recognizance, conditioned for the performance of the duties of any office or position, for the doing or not doing of anything therein specified

c. Obligations guaranteeing the validity or legality of any bond or other obligations issued by any public body, and guaranteeing the title of any real state, merchantile credits, which may be made by any such person, company or corporation

The tax rate is imposed on on each P 4.00 or fractional part thereof, of the premium charged or P0.50. Section 185 governs health and accident policies issued by non-life insurance. With regard to other than such policies, the same are subject to DST under section 184.

M. Annuities and Pre-Need Plans

All policies of annuities, by whatever names the same may be called, whereby an annuity may be made, transferred, or redeemed and all pre-need plans is subject to DST (sec. 187, NIRC).

The tax rate on On policies of annuities, on each P200.00 or fractional part thereof, of the premium or installment payment or contract price collected or P0.50. On pre-need plans, on each P200.00 or fractional part thereof, of the premium or contribution collected or P0.20. On policies of annuities, the old tax base was capital of the annuity or annual income and on pre-need plans the previous tax was premium or contribution collected.

N. Indemnity Bonds

These are the documents which is taxable, to wit:

a. All bonds for indemnifying any person, firm , or corporation who shall become bound or engaged as surety for the payment of any sum of money or for the due execution or performance of the duties of any office or position or to account for money received by virtue thereof;

b. All other bonds of any description, except such as may be required in legal proceedings or are otherwise provided therein.

The tax rate On each P4.00 or fractional part thereof of the premium charged or P 0.30 Section 185 governs health and accident policies issued by non-life insurance company. With regard to other than such policies, the same are subject to DST under section 184.

O. Certificates

What is a Certificate?It is a statement in writing issued by a person having a public and official status concerning some matter within his knowledge or authority. A writing by which testimony is given as the fact has or has not taken place.

All certificates issued by a public official or person acting in a public capacity as well as those issued by a private individual provided they are described under Section 188 of tax code is subject to DST.

The following are kinds of Certificates:a. Certificate of damage or other wiseb. Certificate issued by any customs officer, marine surveyor or other personc. Issued by notary publicd. Certificate of any description required by the lawe. Certificate issued for the purpose of giving information or establishing proof of facts.

Certificate issued for life insurance policies are subject to DST under section 188. On each certificate, the tax rate is P15.00

P. Warehouse Receipts All warehouse receipts for property held in the storage in a public or private house for any person other than the proprietor of such warehouse is subject to DST (Sec. 189, NIRC).

Warehouse receipts issued to any one person in any one calendar month covering property the value of which does not exceed 200 is exempt from DST. On each warehouse receipt, the tax rate is 15.00

Q. Jai-Alai, Horse Race, Lotto, etc.The tax imposed is 0.10. However, if the cost of ticket exceeds P1.00, an additional tax of P0.10 on every P1.00 or fractional part thereof shall be collected as provided by sec. 190 of the NIRC.R. Bills of Lading or ReceiptsWhat is a Bill of Lading?It is a contract by which the carrier agrees to deliver the goods entrusted to him for to the transportation to the person named therein. Freight tickets issued by land transportation companies are bills of lading.Each set of bills of lading or receipts for any goods, merchandise or effects shipped from one port or place in the Philippines or to any foreign port is subject to DST (sec. 191, NIRC). Freight tickets covering goods, merchandise, or effects carried as accompanied baggage of passengers on land and water carriers primarily engaged in the transportation of passengers are declared exempt. The tax on each set is graduated depending upon the value of goods transported as follows:a. Exceeds P100.00 but does not exceed P1,000.00 it shall be at the rate of P1.00b. Exceeds P1,000 it shall be at the rate of P10.00

S. ProxiesWhat is a Proxy?It is the instrument which evidences the formal authority given to a person to vote or act for another.

Every proxy for voting at any election for officers of any company or association, or for any other purpose is subject to DST ( sec. 192, NIRC).

The Following Proxies are exempt from DST, to wit:a. Proxies for the purpose of voting stock or for the transaction of the other business of an incorporated associations or company are not subject to tax.b. Proxies issued affecting the affairs of associations or corporations organized for religious, charitable or literary purposes are also exempt.

On each proxy the tax rate is P15.00 and the tax attaches on the instrument itself.

T. Powers of Attorney What is a Power of Attorney?It is an instrument authorizing a person to act as the agent of the person granting it.

Every power of attorney to perform any act, except acts connected with the collection of claims due from or accruing to the government of republic of the Philippines or the government of any province, city, or municipality is subject to DST (Sec. 193, NIRC).

On each power of attorney, the tax rate is P5.00

U. Leases of Real Property Every lease, agreement, memorandum or contract for hire, use or rent of any lands, or portions thereof is subject to DST (Sec. 194, NIRC).

Tax under this action falls under the category of a direct tax. It is levied, collected and paid by the parties to the transaction in accordance in the section 186. It follows the foreign legation, on condition of reciprocity, if a party to a contract of lease of real property, whether as lessor or lessee, may be exempted from the documentary tax imposed in section 194. For the first P2,000, or fractional part thereof, the tax rate is P3.00;

For every P1, 000, or fractional thereof in excess of the first P2, 000 for each year of the term of said contract or agreement, an additional tax of P1.00.

V. Mortgages, Pledges and Deeds of Trust The following Mortgages, Pledges and deed of trust is subject to DST (Sec. 195, NIRC) to wit:a. Every mortgage or pledge of land, estate or property, heritable or movable, whatsoever where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due.b. Any conveyance of land, estate or property, in trust or to be sold, or otherwise converted into money, which shall be and intended only as security either by express stipulation.

The following are basis and tax rate involving Mortgages, Pledges and Deeds of Trust, to wit: a. If the amount secured does not exceed P5000 the tax rate is P20.00b. On each P5000, or fractional part thereof in excess of P5000 additional tax of P10.00c. Where the mortgage pledge or deed of trust is given as security for the payment of a fluctuating account or future advances without fix limit the tax is computed on the amount actually loaned or given at the time of its execution.d. Where subsequent advances are made on such mortgage pledge or deed of trust the additional tax is computed on the amount advance or loan at the rates above specifiede. Where the full amount of the loan or credit granted is specified, the tax is computed on such amount.

W. Deed of Sale of Real Property All conveyances, deeds, instruments or writings other than grants patents or original certificates of adjunction issued by the government whereby any land tenement or other realty sold shall be granted or conveyed to purchasers shall be subject to DST (Sec. 196, NIRC). The rates are base on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with section 6 of the tax code The tax base for computing the capital gains tax and documentary stamp tax on sale at public auction of the realty of a delinquent tax payer for unpaid real estate taxes is, as in the case of mortgage foreclosure sale under Act. No. 3135, as amended, likewise on the highest bid price. When the consideration or value receive contracted to be paid for such realty after making proper allowance of any encumbrance does not exceed P1000 the tax rate is P15.00 For each additional P1000, or fractional part thereof in excess of P1000 of such consideration or value there will be an additional P15.00

The following and similar conveyances are not subject to tax, to wit:a. Deeds of donation are not subject to documentary stamp tax were as a matter of fact there is no considerationb. The same is true of deeds or of partition unless a consideration passes between the parties by reason of one or more of them taking under the division a share of real estate of greater value than his undivided interest in which event the stamp tax attaches to deeds conveying such greater shares calculated upon the value of such consideration.c. A stock in a corporation is the valuable consideration for transfer of real properties.d. A deed of assignment without considerations made by a corporation engage among others in the sale and development of condominium projects in favour of condominium corporation for the management of the project for the common benefit of the individual unit orders.e. Similarly a deed of reconveyance executed without consideration subsequent to a deed of sale between the same parties which failed to effect the transfer of ownership for lack of cause or consideration is not subject to documentary stamps in section 196f. Agreements to sell real property on instalment basis are not subject to documentary stamp tax.g. Under section 196 the transaction which is tax is the same or conveyance of real property to the purchaser. The sale of land to the government is subject to documentary stamp tax If there is an incorrect consideration and as a result thereof the amount of tax payable has been reduce, the commissioner of internal revenue regional director, revenue district officer and other revenue officer shall from the assessment roles asses the property at its true market value and collect the proper tax thereon.

BIR reiterates tax treatment of liquidating dividends.Stockholders of a liquidating corporation owning various condominium units shall realize capital gain or loss, as the case may be, when the latter distributes to the former its remaining assets. Any capital gain, consisting of the difference between the fair market value of the liquidating dividends and the adjusted cost to the stockholders of their respective shareholdings in the corporation, shall be subject to ordinary income tax at the rates provided under Section 24(a)(1)(c) of the Tax Code. On the other hand, the liquidating corporation shall not be subject to tax either on the transfer of its assets to stockholders or on the receipt of shares surrendered by stockholders. The conveyance of condominium units in the form of liquidating dividends and without consideration shall not be subject to DST.( BIR No. DA-084-2005, March 14, 2005)

Additional infusion of capital not subject to Capital Gains Tax and DST.The transfer by stockholders of real property to a corporation in the nature of paid-in surplus without shares being issued, being a capital investment, is not within the purview of the term, taxable income, as defined in Section 32 of the 1997 Tax Code (see also Section 56 of Rev. Regs. 2). The real property transferred should not be treated as income to the corporation. Hence, it is not subject to income tax. Furthermore, considering that the real property was transferred without the corresponding issuance of additional shares in favor of the stockholders, no documentary stamp tax was due. The conveyance of realty was made not in connection with a sale (Section 185, DST Regs.). (BIR Ruling No. DA-065-2005, February 23, 2005)

Partition of Properties not subject to Capital Gains Tax, DST and VAT.The BIR ruled that partition of properties among co-owners without any consideration is not subject to capital gains tax, DST under Section 196 of the Tax Code of 1997 and VAT considering that there is no sale, exchange or disposition of property. The agreement is subject however to the P15.00 DST as prescribed in Sec. 188 of the Tax Code of 1997. ( BIR Ruling DA-640-2004, December 17, 2004)

Reconveyance of property without monetary consideration not subject to Capital Gains Tax and DST. (BIR Ruling DA-648-2004, December 21, 2004.)

i.e. In 1964 a deed of sale was executed between Mrs. A and her eldest son over a parcel of land for the purpose of securing a housing loan from the SSS. The said deed of sale has been executed for convenience and without monetary consideration. To be fair among all of Mrs. As heirs and to put everything prospectively to avoid confusion and problems in the future, a deed of sale was executed in 1975 to revert back the property to Mrs. A, again for convenience and without monetary consideration. Ruling: The BIR ruled that considering that the transfer of the subject property is without consideration and was executed only as a requirement for the granting of the SSS loan, the reconveyance of the same in Mrs. As favor is exempt from the payment of capital gains tax and documentary stamp tax prescribed under Section 196 of the Tax Code of 1997.However, the notarial acknowledgement is subject to the P15.00 documentary stamp tax under Section 188 of the same Code.

X. Charter Party and Similar Instruments

What is a Charter Party?It is a contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or person or both for a fixed price.

The following Charter parties are subject to DST (Sec. 197, NIRC) to wit:

a. Every character party ,contract or agreement for the character of any ship, vessel or streamer or any letter of memorandum or other writing between the captain , master or owner or the other person or person or persons for or relating to the charter of any such ship, vessel or streamerb. Any renewal or transfer of such charter, contract, agreement, letter or memorandum.

If the registered gross tonnage of the ship, vessel or streamer does not exceed 1000 tons and the duration of the charter or contract does not exceed 6 months. The tax rate is P500.00And each of the month or fraction of a month in excess of 6 months additional P50.00 accrues If the registered tonnage exceeds 1000 tons and does not exceed 10 000 tons and the duration of the character or contract does not exceed 6 months the tax rate is P1000And for each month or fraction of a month in excess of six (6) months an additional tax of P100.00

If the registered gross tonnage exceeds 10 000 tons and the duration of the contract or charter does not exceed 6 mos. The tax rate is P1500.00And for each month or fraction of a month in excess of six (6) months an additional tax of P150.00

Y. Assignment, Transfer, and Renewal of Certain Instruments Each and every assignment or transfer of mortgage, lease or policy of insurance, or renewal or continuance of any agreement, contract, charter or any evidence of obligation of indebtedness by altering or otherwise shall be subject to DST (Sec. 198, NIRC).

III. Transactions/Documents not Subject to Documentary Stamp Tax

Documentary stamp tax is imposed upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the samewherever the document is made, signed, issued, accepted, or transferredwhen the obligation or right arises from Philippine sources or the property is situated in the Philippines,and the same time such act is done or transaction had. Whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax.There are, however, exemptions provided for in sec. 199 of the National Internal Revenue Code, as supplemented by Revenue Regulation no. 13-2004 specifically sec. 9, to wit:a. Policies of insurance or annuities made or granted by a fraternal or beneficiary society, order, association or cooperative company, operated on the lodge system or local cooperation plan and organized and conducted solely by the members thereof for the exclusive benefit of each member and not for profitb. Certificates of oaths administered by any government official in his official capacity or acknowledgement by any government official in performance of his official dutyc. Written appearance in any court by any government official in his official capacityd. Certificates of the administration of oaths to any person as to the authenticity of any paper required to be filed in court by any person or party thereto, whether the proceedings be civil or criminale. Papers and documents filed in court by or for the national, provincial, city or municipal governmentsf. Affidavits of poor persons for the purpose of proving povertyg. Statements and other compulsory information required of persons or corporations by the rules and regulations of the national, provincial, city or municipal government exclusively for statistical purposes and which are wholly for the use of the Bureau or office in which they are filed, and not at the instance or for the use or benefit of the person filing themh. Certified copies and other certificates placed upon documents, instruments and papers for the national, provincial, city or municipal governments made at the instance and for the sole use of some other branch of the national, provincial, city or municipal governmentsi. Certificates of the assessed value of lands, not exceeding P200 in value assessed, furnished by the provincial, city or municipal Treasurer to applicants for registration of title to landj. Borrowing and lending of securities executed under the Securities Borrowing and Lending Program of a registered exchange, or in accordance with regulations prescribed by the appropriate regulatory authority: Provided, however, That any borrowing or lending of securities agreement as contemplated hereof shall be duly covered by a master securities borrowing and lending agreement acceptable to the appropriate regulatory authority, and which agreement is duly registered and approved by the Bureau of Internal Revenue (BIR)k. Loan agreements or promissory notes, the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000), or any such amount as may be determined by the Secretary of Finance, executed by an individual for his purchase on installment for his personal use or that of his family and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture: Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance with a relevant price index but not to exceed ten percent (10%) of the current amount and shall remain in force at least for three (3) yearsl. Sale, barter or exchange of shares of stock listed and traded through the local stock exchange (R.A 9648)m. Assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness, if there is no change in the maturity date or remaining period of coverage from that of the original instrument.n. Fixed income and other securities traded in the secondary market or through an exchange.o. Derivatives: Provided, That for purposes of this exemption, repurchase agreements and reverse repurchase agreements shall be treated similarly as derivativesp. Interbranch or interdepartmental advances within the same legal entityq. All forebearances arising from sales or service contracts including credit card and trade receivables: Provided, That the exemption be limited to those executed by the seller or service provider itself.r. Bank deposit accounts without a fixed term or maturitys. All contracts, deeds, documents and transactions related to the conduct of business of the Bangko Sentral ng Pilipinast. Transfer of property pursuant to Section 40(C)(2) of the National Internal Revenue Code of 1997, as amendedu. Interbank call loans with maturity of not more than seven (7) days to cover deficiency in reserves against deposit liabilities, including those between or among banks and quasi-banks

Subsequent transfer of debt instrument issued pursuant to a tax free exchange is not subject to DST provided there is no increase in the amount or change in the maturity date of the debt instrument. (BIR Ruling No. DA-244-2005 dated June 7, 2005.)

i.e. A Inc. and B Inc. entered into a tax-deferred exchange transaction under Section 40(C)(2)and (C)(6) of the Tax Code of 1997, whereby A Inc. transferred Receivables to B Inc. inexchange for shares and debt instruments issued by B Inc. The BIR ruled that the DSTdue on the issuance of the debt instruments shall be subject to P1.00 for every P200, or afractional part thereof, of the issue value. However, the subsequent assignment, transferor amendment of such debt instruments by A Inc. shall not be subject to DST providedthat there is no increase in the amount or change in the maturity date from that of theoriginal instrument pursuant to Section 199(F) of the Tax Code of 1997, as amended byRepublic Act No. 9243.

In the case of Belle Corp. v. CIR, CTA Case No. 6156, June 17, 2005, the court ruled that Inter-company advances are not considered as debts which is subject to DST, the decision is stated herein, to wit:

"Based on our review of the supporting documentspresented to us, we were able to ascertain that the company'sadvances to its subsidiaries and affiliates for the year 1997amounting to P23,395,372,092.89 were not documented in anyform of a promissory note, nor a certificate of indebtedness ora certificate of obligation issued by the respective subsidiariesand affiliates. The said advances were only evidenced bydisbursement vouchers, journal voucher and inter-officememoranda issued by the Company."

Promissory note is defined as an unconditional promise in writing byone person to another signed by the maker engaging to pay on demand or at a fixed or determinable future time, a sum certain in money to such other person or to order or to bearer, free from restrictions as to registration or transfer and usually without coupons. Similarly, a promissory note refers to an instrument, whether negotiable or non-negotiable, whereby the maker agrees to pay a sum certain in money or its equivalent at a definite time. Thus, from the foregoing, we do not agree with the respondent that the inter-company advances evidenced by interoffice memorandum, vouchers, or board resolutions are in the nature of a promissory note. The definition is clear, and when the law speaks in clear and categorical language, there is no room for interpretation, but only application. There is nothing in Section 180 that clearly and expressly declares inter-office memoranda covering inter-company advances made by petitioner as subject to the documentary stamp tax therein.

IV. Payment of Documentary Stamp Tax

Manner of Payment DST is paid manually or through electronic filing and payment system (EFPS), or through the loose documentary stamps for the purpose depending on the type of taxable transactions. Loose documentary stamp is the one attached to official documents or certificates issued by government agencies.

Procedures File BIR Form No. 2000 or BIR Form No. 2000-OT in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the seller or transferor is registered, for shares of stocks or where the property is located, for real property. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer. One-Time Transaction (ONETT) taxpayers shall mandatorily use the eBIRForms in filing all of their tax returns. They may opt to submit their tax returns manually using the eBIRForms Offline Package in the RDO where the seller or transferor is registered, for shares of stocks or where the property is located, for real property or electronically through the use of the Online eBIRForms System. (Sec. 3(2) RR No. 6-2014) Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the seller.

The Documentary Stamp Tax return (BIR Form 2000) shall be filed in triplicate (two copies for the BIR and one copy for the taxpayer) within five (5) days after the close of the month when the taxable document was made signed, issued, accepted or transferred; upon remittance by Collection Agents of collection from sale of loose stamps. The Documentary Stamp Tax shall be paid upon filing of the return. Wherever one party to the taxable document enjoys exemption from the tax imposed, the other party who is not exempt will be the one directly liable to file Documentary Stamp Tax Declaration and pay the applicable stamp tax.Who are required to file Documentary Stamp Tax Declaration Return?a. In case of constructive affixture of documentary stamps, by the persons making, signing, issuing, accepting or transferring documents, instruments, loan agreements and papers, acceptances, assignments, sales and conveyances of the obligation, right or property incident thereto wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines at the same time such act is done or transaction had;b. By using the web-based Electronic Documentary Stamp Tax (eDST) System in the payment/remittance of its/his/her DST liabilities and the affixture of the prescribed documentary stamp on taxable documents; andc. By Revenue Collection Agent, for remittance of sold loose documentary stamps.

Where is the Documentary Stamp Tax Declaration Return filed?In the Authorized Agent Bank (AAB) within the territorial jurisdiction of the RDO which has jurisdiction over the residence or principal place of business of the taxpayer or where the property is located in case of sale of real property or where the Collection Agent is assigned. In places where there is no Authorized Agent Bank, the return will be filed with the Revenue Collection Officer or duly authorized City or Municipal Treasurer where the taxpayer's residence or principal place of business is located or where the property is located in case of sale of real property or where the Collection Agent is assigned.V. Effect of non-payment of Documentary Stamp TaxThe following are the effects, to wit:

a. The untaxed document will not be recorded, nor will it or any copy thereof or any record of transfer of the same be admitted or used in evidence in court until the requisite stamp or stamps have been affixed thereto and cancelled;b. No notary public or other officer authorized to administer oaths will add his jurat or acknowledgment to any document subject to Documentary Stamp Tax unless the proper documentary stamps are affixed thereto and cancelled.

DOCUMENTARY STAMP TAX LEGAL PAPER

Submitted to: Atty. Bernadette Caswang Mendoza Submitted by: Amado N. Vallejo III