Tambunting vs CIR

G.R. No. 179085

TAMBUNTING PAWNSHOP, INC.

Petitioner- versus -

COMMISSIONER OF INTERNAL REVENUE

Promulgated:

January 21, 2010

[1]Petitioner protested the assessment.

[2] As the protest merited no response, it filed a Petition for Review

[3] with the Court of Tax Appeals (CTA) pursuant to Section 228 of the National Internal

Revenue Code,

[4] raising the following arguments:

A. Pawnshops are not subject to Value Added Tax pursuant to Section 108 of the

National Internal Revenue Code.[5]

B. Petitioner properly withheld and remitted to the respondent the correct

amount of expanded withholding tax for taxable year 1999.[6]

C. Petitioner has already paid the assessed amount of P14,398.38 [sic],

representing deficiency withholding tax on compensation, thus, assessment on

withholding on compensation must be cancelled.[7]

D. Petitioner’s pawn tickets are not subject to documentary stamp tax pursuant

to existing laws and jurisprudence.[8] (emphasis and underscoring in the original)

The First Division of the CTA ruled that petitioner is liable for VAT and documentary stamp

tax but not for withholding tax on compensation and expanded withholding tax.[9] Thus it

disposed:

WHEREFORE, premises considered, the Petition for Review is PARTIALLY GRANTED.

Respondent’s assessments for deficiency Expanded Withholding Tax and Withholding Tax on

Compensation for the taxable year 1999, in the amounts of Twenty One Thousand Seven

Hundred Twenty Three and 75/100 Pesos (P21,723.75) and Sixty Seven Thousand Two

Hundred One and 55/100 Pesos (P67,201.55), respectively, are herebyCANCELLED and SET

ASIDE. However, the assessments for deficiency Value-Added Tax and Documentary Stamp

Tax are hereby AFFIRMED.

Accordingly, petitioner is ORDERED TO PAY the respondent the amount of Three Million Fifty

Five Thousand Five Hundred Sixty Four and 34/100 Pesos (P3,055,564.34) andFour Hundred

Six Thousand Ninety Two and 500/100 Pesos (P406,092.50) representing deficiency Value-

Added Tax and Documentary Stamp Tax, respectively, for the taxable year 1999, plus 20%

delinquency interest from February 18, 2003 up to the time such amount is fully paid

pursuant to Section 249 (c) of the 1997 NIRC.

SO ORDERED.[10] (emphasis in the original; underscoring supplied)

Petitioner’s Motion for Partial Reconsideration[11] having been denied,[12] it filed a Petition

for Review[13] before the CTA En Banc which dismissed[14] it as it did petitioner’s Motion

for Reconsideration.[15]

Hence, the present Petition for Review on Certiorari.[16]

To petitioner, a pawnshop is not enumerated as one of those engaged in “sale or exchange

of services”[17] in Section 108 of the National Internal Revenue Code.[18] Citing

Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshops, Inc.,[19] it contends that

the nature of the business of pawnshops does not fall under “service” as defined under the

Legal Thesaurus of William C. Burton, viz:

accommodate, administer to, advance, afford, aid, assist, attend, be of use, care for, come

to the aid of, commodere, comply, confer a benefit, contribute to, cooperate, deservire,

discharge one’s duty, do a service, do one’s bidding, fill an office, forward, furnish aid,

furnish assistance, give help, lend, aid, minister to, promote, render help, servire, submit,

succor, supply aid, take care of, tend, wait on, work for.[20]

The petition is in part meritorious.

1. On the issue of whether pawnshops are liable to pay VAT,

the Court, in First Planters Pawnshop, Inc. v. Commissioner of Internal Revenue,[21]

held:

In fine, prior to the [passage of the] EVAT Law [in 1994], pawnshops were treated as

lending investors subject to lending investor’s tax. Subsequently, with the Court’s ruling in

Lhuillier, pawnshops were then treated as VAT-able enterprises under the general

classification of “sale or exchange of services” under Section 108 (A) of the Tax Code of

1997, as amended.R.A. No. 9238 [which was passed in 2004] finally classified pawnshops as

Other Non-bank Financial Intermediaries.

The Court finds that pawnshops should have been treated as non-bank financial

intermediaries from the very beginning, subject to the appropriate taxes provided by law,

thus —

• Under the National Internal Revenue Code of 1977, pawnshops should have

been levied the 5% percentage tax on gross receipts imposed on bank and non-bank

financial intermediaries under Section 119 (now Section 121 of the Tax Code of

1997);

• With the imposition of the VAT under R.A. No. 7716 or the EVAT Law, pawnshops

should have been subjected to the 10% VAT imposed on banks and non-bank financial

intermediaries and financial institutions under Section 102 of the Tax Code of 1977 (now

Section 108 of the Tax Code of 1997);

• This was restated by R.A. No. 8241, 24 which amended R.A. No. 7716, although the

levy, collection and assessment of the 10% VAT on services rendered by banks, non-bank

financial intermediaries, finance companies, and other financial intermediaries not

performing quasi-banking functions, were made effective January 1, 1998;

• R.A. No. 8424 or the Tax Reform Act of 1997 26 likewise imposed a 10% VAT under

Section 108 but the levy, collection and assessment thereof were again deferred until

December 31, 1999;

• The levy, collection and assessment of the 10% VAT was further deferred by R.A. No.

8761 until December 31, 2000, and by R.A. No. 9010, until December 31, 2002;

• With no further deferments given by law, the levy, collection and assessment of the

10% VAT on banks, non-bank financial intermediaries, finance companies, and other

financial intermediaries not performing quasi-banking functions were finally made effective

beginning January 1, 2003;

• Finally, with the enactment of R.A. No. 9238 in 2004, the services of banks, non-

bank financial intermediaries, finance companies, and other financial intermediaries not

performing quasi-banking functions were specifically exempted from VAT, 28 and the 0% to

5% percentage tax on gross receipts on other non-bank financial intermediaries was

reimposed under Section 122 of the Tax Code of 1997.

At the time of the disputed assessment, that is, for the year 2000, pawnshops

were not subject to 10% VAT under the general provision on “sale or exchange of

services” as defined under Section 108 (A) of the Tax Code of 1997, which states:

‘‘sale or exchange of services’ means the performance of all kinds of services in

the Philippines for others for a fee, remuneration or consideration . . . .” Instead,

due to the specific nature of its business, pawnshops were then subject to 10%

VAT under the category of non-bank financial intermediaries[.]

Coming now to the issue at hand — Since petitioner is a non-bank financial intermediary,

it is subject to 10% VAT for the tax years 1996 to 2002; however, with the levy, assessment

and collection of VAT from non-bank financial intermediaries being specifically deferred by

law, then petitioner is not liable for VAT during these tax years. But with the full

implementation of the VAT system on non-bank financial intermediaries starting January 1,

2003, petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the

present, by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to

percentage tax on gross receipts from 0% to 5%, as the case may be. (emphasis and

underscoring supplied)

In light of the foregoing ruling, since the imposition of VAT on pawnshops, which are non-

bank financial intermediaries, was deferred for the tax years 1996 to 2002, petitioner is not

liable for VAT for the tax year 1999.

Issue number 2:

In dodging liability for documentary stamp tax on its pawn tickets, petitioner

argues that such tickets are neither securities nor printed evidence of

indebtedness.[22]

The argument fails.

Section 195 of the National Internal Revenue Code provides:

Section 195.

On every mortgage or pledge of lands, estate or property, real or personal, 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 and owing or forborne

to be paid, being payable, and on any conveyance of land, estate, or property whatsoever,

in trust or to be sold, or otherwise converted into money which shall be and intended only as

security, either by express stipulation or otherwise, there shall be collected a documentary

stamp tax x x x. (underscoring supplied)

Construing this provision vis a vis pawn tickets, the Court held in Michel J. Lhuillier

Pawnshop, Inc. v. Commissioner of Internal Revenue:

x x x A D[ocumentary] S[tamp] T[ax] is an excise tax on the exercise of a right or privilegeto

transfer obligations, rights or properties incident thereto. x x x

x x x x

Pledge is among the privileges, the exercise of which is subject to DST. A pledge may be

defined as an accessory, real and unilateral contract by virtue of which the debtor or a third

person delivers to the creditor or to a third person movable property as security for the

performance of the principal obligation, upon the fulfillment of which the thing pledged, with

all its accessions and accessories, shall be returned to the debtor or to the third person.

This is essentially the business of pawnshops which are defined under Section 3 of

Presidential Decree No. 114, or the Pawnshop Regulation Act, as persons or entities engaged

in lending money on personal property delivered as security for loans.

x x x x

Section 3 of the Pawnshop Regulation Act defines a pawn ticket as follows:

“Pawn ticket” is the pawnbrokers’ receipt for a pawn. It is neither a security nor a printed

evidence of indebtedness.”

True, the law does not consider said ticket as an evidence of security or indebtedness.

However, for purposes of taxation, the same pawn ticket is proof of an exercise of a taxable

privilege of concluding a contract of pledge. There is therefore no basis in petitioner’s

assertion that a DST is literally a tax on a document and that no tax may be imposed on a

pawn ticket.[23] (emphasis and underscoring supplied)

Issue number 3:

With respect to petitioner’s argument against liability for surcharges and interest

— that it was in good faith in not paying documentary stamp taxes, it having relied on the

rulings of respondent CIR and the CTA that pawn tickets are not subject to documentary

stamp taxes[24]— the Court finds the same meritorious.

It is settled that good faith and honest belief that one is not subject to tax on the basis of

previous interpretations of government agencies tasked to implement the tax law are

sufficient justification to delete the imposition of surcharges and interest.[25]

WHEREFORE, the petition is IN PART GRANTED. The May 24, 2007 Decision of the Court of

Tax Appeals is AFFIRMED with the MODIFICATION that the assessment deficiency value-

added taxes for the taxable year 1999 and for surcharges and delinquency interest on

deficient Value-Added Tax and Documentary Income Tax are SET ASIDE.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chief Justice

Chairperson

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN

Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in

the above decision had been reached in consultation before the case was assigned to the

writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

[1] CIR records, pp. 293-303.

[2] Id. at 304-308.

[3] CTA First Division rollo, pp. 1-13.

[4] Section 228:

x x x x

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty

(180) days from submission of documents, the taxpayer adversely affected by the decision

or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the

said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the

decision shall become final, executory, and demandable.

[5] CTA First Division rollo, p. 3.

[6] Id. at 9.

[7] Id. at 10.

[8] Ibid.

[9] Decision of October 5, 2006, penned by CTA Associate Justice Lovell R. Bautista, with

the concurrence of Presiding Justice Ernesto D. Acosta and Associate Justice Caesar A.

Casanova. Id. at 143-156.

[10] Id. at 155-156.

[11] Id. at 157-170.

[12] Id. at 174-175.

[13] CTA En Banc rollo, pp. 8-36.

[14] Decision of May 24, 2007, penned by CTA Associate Justice Olga Palanca-Enriquez,

with the concurrence of Presiding Justice Ernesto D. Acosta and Associate Justice Juanito C.

Castañeda, Jr. cta En Banc rollo, pp. 64-83.

[15] Id. at 105-106.

[16] Rollo, pp. 8-30.

[17] Id. at 11-16.

[18] SECTION 108. Value-added Tax on Sale of Services and Use or Lease of Properties. —

(A) Rate and Base of Tax. — There shall be levied, assessed and collected, a value-

added tax equivalent to ten percent (10%) of gross receipts derived from the sale or

exchange of services, including the use or lease of properties.

The phrase ‘sale or exchange of services’ means the performance of all kinds of services in

the Philippines for others for a fee, remuneration or consideration, including those

performed or rendered by construction and service contractors; stock, real estate,

commercial, customs and immigration brokers; lessors of property, whether personal or real;

warehousing services; lessors or distributors of cinematographic films; persons engaged in

milling, processing, manufacturing or repacking goods for others; proprietors, operators or

keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators

of restaurants, refreshment parlors, cafes and other eating places, including clubs and

caterers; dealers in securities; lending investors; transportation contractors on their

transport of goods or cargoes, including persons who transport goods or cargoes for hire and

other domestic common carriers by land, air and water relative to their transport of goods or

cargoes; services of franchise grantees of telephone and telegraph, radio and television

broadcasting and all other franchise grantees except those under Section 119 of this Code;

services of banks, non-bank financial intermediaries and finance companies; and non-life

insurance companies (except their crop insurances), including surety, fidelity, indemnity and

bonding companies; and similar services regardless of whether or not the performance

thereof calls for the exercise or use of the physical or mental faculties. The phrase ‘sale or

exchange of services’ shall likewise include:

(1) The lease or the use of or the right or privilege to use any copyright, patent,

design or model, plan, secret formula or process, goodwill, trademark, trade brand or other

like property or right;

(2) The lease or the use of, or the right to use of any industrial, commercial or

scientific equipment;

(3) The supply of scientific, technical, industrial or commercial knowledge or

information;

(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as

a means of enabling the application or enjoyment of any such property, or right as is

mentioned in subparagraph (2) or any such knowledge or information as is mentioned in

subparagraph (3);

(5) The supply of services by a nonresident person or his employee in connection with

the use of property or rights belonging to, or the installation or operation of any brand,

machinery or other apparatus purchased from such nonresident person;

(6) The supply of technical advice, assistance or services rendered in connection with

technical management or administration of any scientific, industrial or commercial

undertaking, venture, project or scheme;

(7) The lease of motion picture films, films, tapes and discs; and

(8) The lease or the use of or the right to use radio, television, satellite transmission

and cable television time.

Lease of properties shall be subject to the tax herein imposed irrespective of the place

where the contract of lease or licensing agreement was executed if the property is leased or

used in the Philippines.

The term “gross receipts” means the total amount of money or its equivalent representing

the contract price, compensation, service fee, rental or royalty, including the amount

charged for materials supplied with the services and deposits and advanced payments

actually or constructively received during the taxable quarter for the services performed or

to be performed for another person, excluding value-added tax.

x x x x

[19] 453 Phil. 1043 (2003).

[20] quoted in rollo, p. 14.

[21] G.R. No. 174134, July 30, 2008, 560 SCRA 606.

[22] Rollo, pp. 22-23.

[23] Michel J. Lhuillier Pawnshop, Inc. v. Commissioner on Internal Revenue, G.R. No.

166786, May 3, 2006, 489 SCRA 147, 152-154.

[24] Vide rollo, pp. 23-24; CIR records, pp. 317-318.

[25] Vide Michel J. Lhuillier Pawnshop, Inc. v. Commissioner on Internal Revenue, G.R. No.

166786, September 11, 2006, 501 SCRA 450, 460.

Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

H. TAMBUNTING PAWNSHOP, INC.,

Petitioner,

-versus -

COMMISSIONER OF INTERNAL REVENUE,

Respondent.

G.R. No. 172394

Present:

CORONA*, C.J.,

CARPIO MORALES, Chairperson,

BERSAMIN,

VILLARAMA, JR., and

SERENO, JJ.

Promulgated:

October 13, 2010

x-----------------------------------------------------------------------------------------x

D E C I S I O N

BERSAMIN, J.:

The issue herein is whether the petitioner, a pawnshop operator, was liable for VAT and the

compromise penalty for taxable year 2000.

On August 29, 2003, petitioner H. Tambunting Pawnshop, Inc. (Tambunting), a domestic

corporation duly licensed to engage in the pawnshop business, received an assessment

notice dated August 27, 2003 from the Bureau of Internal Revenue (BIR), demanding the

payment of deficiency Value-Added Tax (VAT) and compromise penalty for taxable year

2000 in the amounts of P5,212,404.52 and P25,000, respectively.

On September 15, 2003, Tambunting, disclaiming its liability, protested the assessment with

the respondent Commissioner of Internal Revenue (CIR), arguing that a pawnshop business

was not subject to VAT and the compromise penalty.[1]

Due to the inaction of the CIR on the protest, Tambunting filed on April 2, 2004 its petition

for review with the Court of Tax Appeals (CTA) pursuant to Section 228 of Republic Act No.

8424 (National Internal Revenue Code or Tax Reform Act of 1997).[2]

In a decision dated April 11, 2005,[3] the CTA Second Division denied the petition for review,

to wit:

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY

GRANTED. Accordingly, petitioner is hereby ORDERED to pay respondent Commissioner

of Internal Revenue the deficiency VAT for taxable year 2000 in the amount of PhP

5,212,404.52, plus 25% surcharge and 20% delinquency interest per annum from

September 29, 2003 until fully paid, pursuant to Section 248 and 249 of the NIRC of 1997, as

amended.

The amount of PhP25,000 imposed by way of compromise penalty is hereby DELETED.

SO ORDERED.

On April 29, 2005, Tambunting filed a motion for partial reconsideration.[4] Later on, on May

26, 2005, Tambunting submitted a written manifestation, attaching a copy of Bureau of

Internal Revenue (BIR) tax payment deposit slip (BIR Form No. 0605) and the corresponding

schedule evidencing its payment of P828,809.67 for the years from 2000 to 2002 pursuant

to a settlement agreement with BIR allowing Tambunting to pay 25% of its VAT due.[5]

On July 14, 2005, however, the CTA Second Division denied Tambunting’s motion for partial

reconsideration in a resolution dated July 14, 2005.[6]

On August 22, 2005, Tambunting appealed by petition for review to the CTA en banc.[7]

On March 21, 2006, the CTA en banc rendered its assailed decision,[8] disposing thus:

WHEREFORE, the Court en banc finds no reversible error to warrant the reversal of the

assailed Decision promulgated on April 11, 2005 and the Resolution dated July 14, 2005,

respectively.

Accordingly, the instant Petition for Review is hereby DENIED and the assailed Decision and

Resolution are AFFIRMED in toto.

SO ORDERED.

The CTA en banc denied Tambunting’s motion for reconsideration on April 18, 2006.

[9]

Hence, Tambunting has appealed, insisting that:

THE CTA EN BANC’S DECISION OF 21 MARCH 2006 AND RESOLUTION DATED 18 APRIL 2006

ARE NOT IN ACCORDANCE WITH LAW AND SETTLED JURISPRUDENCE ON THE MATTER.

Tambunting’s main argument is that pawnshops are not within the concept of “all

services” and “similar services” as provided in Section 108 (A) of the National Internal

Revenue Code.[10] Tambunting also argues that the enumeration under Section 108(A) of

the National Internal Revenue Code of services subject to VAT is exclusive.

The petition has merit.

It is now settled that for purposes of determining their tax liability, pawnshops are

treated as non-bank financial intermediaries.[11]

The VAT on non-bank financial intermediaries was first levied under R.A. No. 7716

(Expanded Value-Added Tax Law), where Sections 3 and 17 thereof provide:

Section 3. Section 102 of the National Internal Revenue, as amended is hereby further

amended to read as follows:

Section 102. Value-added tax on sale of services and use or lease of properties.- There shall

be levied, assessed and collected, a value-added tax equivalent to 10% of gross receipts

derived from the sale or exchange of services, including the use or lease of properties.

The phrase ‘sale or exchange of services’ means the performance of all kinds of services in

the Philippines for others for a fee, remuneration or consideration x x x

x x x services of banks, non-bank financial intermediaries and finance companies; x x x

Section 17. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services.-

The value-added tax shall be levied assessed and collected on the following transactions,

two (2) years after the effectivity of this Act:

x x x

(b) Services rendered by banks, nonbank financial intermediaries, finance companies and

other financial companies and other financial intermediaries not performing quasi-banking

functions; x x x

However, Section 11 of R.A. No. 8241 amended Section 17 of R.A. No. 7716 to move

the effectivity of the VAT on non-bank financial intermediaries to January 1, 1998, viz:

Section 11. Section 17 of Republic Act No. 7716 is hereby amended to read as follows:

Section 17. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services.-

The value-added tax shall be levied assessed and collected on the following transactions

starting January 1, 1998:

x x x

(b) Services rendered by banks, nonbank financial intermediaries, finance companies

and other financial intermediaries not performing quasi-banking functions; x x x

Later, R.A. No. 8424 (National Internal Revenue Code or Tax Reform Act of 1997)

again moved the effectivity of the imposition of the VAT to December 31, 1999, to wit:

Section 5. Transitory Provisions- Deferment of the Effectivity of the Imposition of VAT on

Certain Services.- The effectivity of the imposition of the value-added tax on services as

prescribed in Section 17(a) and (b) of Republic Act No. 7716, as amended by Republic Act

No. 8241, is hereby further deferred until December 31, 1999, unless Congress deems

otherwise: Provided, That the said services shall continue to pay the applicable tax

prescribed under the present provisions of the National Internal Revenue Code, as amended.

Still later, R.A. No. 8761 retarded the effectivity of the VAT on non-bank financial

intermediaries to January 1, 2001, thus:

Section 1. Section 5 of Republic Act No. 8424 is hereby amended to read as follows:

Section 5. Transitory Provisions- Effectivity of the Imposition of VAT on Certain Services.- The

imposition of the value-added tax on the following services shall take effect on January 1,

2001:

x x x

(b) Services rendered by banks, non-bank financial intermediaries, finance companies, and

other financial intermediaries not performing quasi-banking functions; x x x

Lastly, R.A. No. 9010 revised the effectivity of the VAT on non-bank financial

intermediaries by making it start on January 1, 2003:

Section 1. Section 5 of Republic Act No. 8424 as amended by Republic Act No. 8761 is

hereby further amended to read as follows:

Section 5. Transitory Provisions- Effectivity of the Imposition of VAT on Certain Services.- The

imposition of the value-added tax on the following services shall take effect on January 1,

2003:

x x x

(b) Services rendered by banks, non-bank financial intermediaries, finance companies, and

other financial intermediaries not performing quasi-banking functions; x x x

Accordingly, the consecutive deferments of the effectivity date of the application of

VAT on non-bank financial intermediaries like pawnshops resulted in their non-liability for

VAT during the affected taxable years. Specifically, in First Planters Pawnshop, supra, the

Court ruled on the VAT liability of pawnshops for taxable years from 1996 to 2002, holding:

xxx Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for

the tax years 1996 to 2002; however, with the levy, assessment and collection of VAT from

non-bank financial intermediaries being specifically deferred by law, then petitioner is

not liable for VAT during these tax years. But with the full implementation of the

VAT system on non-bank financial intermediaries starting January 1, 2003,

petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the

present, by virtue of R.A. No. 9238, Petitioner is no longer liable for VAT but it is

subject to percentage tax on gross receipts from 0% to 5%, as the case may be.

The aforequoted pronouncement in First Planters Pawnshop has been reiterated in

Tambunting Pawnshop, Inc. v. Commissioner of Internal Revenue[12] and in TFS,

Incorporated v. Commissioner of Internal Revenue,[13] thereby affirming the non-liability for

VAT of pawnshops in taxable years 1996-2002 by virtue of the deferment of its imposition.

Consequently, the VAT deficiency assessment and the surcharge served on Tambunting by

the BIR lacked legal basis and must be canceled.

As earlier mentioned, however, Tambunting paid to the BIR 25% of its VAT liability for the

years 2000 to 2002 pursuant to a settlement agreement. The tax liability in question herein

includes taxable year 2000 only. To align with the result herein, therefore, Tambunting is

entitled to a refund of any amount paid pursuant to the settlement agreement

corresponding to taxable year 2000 only.

WHEREFORE, we grant the petition for review on certiorari, and reverse and set aside the

decision dated March 21, 2006 and the resolution dated April 18, 2006 of the Court of Tax

Appeals en banc. We declare that the petitioner was not liable for the Value-Added Tax in

taxable year 2000; and order the Commissioner of Internal Revenue to refund to H.

Tambunting Pawnshop, Inc. any amount paid pursuant to the settlement agreement

corresponding to taxable year 2000 only.

No pronouncement on cost of suit.

SO ORDERED.

LUCAS P. BERSAMIN

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

CONCHITA CARPIO MORALES MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

Chairperson

MARIA LOURDES P. A. SERENO

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation

before the case was assigned to the writer of the opinion of the Court’s Division.


Associate Justice

Chairperson

C E R T I F I CA T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s

Attestation, I certify that the conclusions in the above Decision had been reached in

consultation before the case was assigned to the writer of the opinion of the Court’s

Division.

RENATO C. CORONA

Chief Justice

* Designated as additional member per Raffle dated October 11, 2010 in lieu of Justice

Arturo D. Brion.

[1] Rollo, p. 29.

[2] Section 228. Protesting of Assessment. - When the Commissioner or his duly

authorized representative finds that proper taxes should be assessed, he shall first notify the

taxpayer of his findings: xxx

xxx

The taxpayers shall be informed in writing of the law and the facts on which the assessment

is made; otherwise, the assessment shall be void.

Within a period to be prescribed by implementing rules and regulations, the taxpayer shall

be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or

his duly authorized representative shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration

or reinvestigation within thirty (30) days from receipt of the assessment in such form and

manner as may be prescribed by implementing rules and regulations.

Within sixty (60) days from filing of the protest, all relevant supporting documents shall have

been submitted; otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty

(180) days from submission of documents, the taxpayer adversely affected by the decision

or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the

said decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the

decision shall become final, executory and demandable.

[3] Rollo, pp. 46-64.

[4] Id., pp. 65-80.

[5] Id., pp. 29-30.

[6] Id., pp. 79-80.

[7] Id., pp. 81-140.

[8] Id., pp. 28-43.

[9] Id., pp. 44-45.

[10] Section 108. Value-added Tax on Sale of Services and Use or Lease of Properties.

(A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-

added tax equivalent to ten percent (10%) of gross receipts derived from the sale or

exchange of services, including the use or lease of properties.

The phrase "sale or exchange of services" means the performance of all kinds or

services in the Philippines for others for a fee, remuneration or consideration, including

those performed or rendered by construction and service contractors; stock, real estate,

commercial, customs and immigration brokers; lessors of property, whether personal or real;

warehousing services; lessors or distributors of cinematographic films; persons engaged in

milling processing, manufacturing or repacking goods for others; proprietors, operators or

keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators

of restaurants, refreshment parlors, cafes and other eating places, including clubs and

caterers; dealers in securities; lending investors; transportation contractors on their

transport of goods or cargoes, including persons who transport goods or cargoes for hire

another domestic common carriers by land, air and water relative to their transport of goods

or cargoes; services of franchise grantees of telephone and telegraph, radio and television

broadcasting and all other franchise grantees except those under Section 119 of this Code;

services of banks, non-bank financial intermediaries and finance companies; and non-life

insurance companies (except their crop insurances), including surety, fidelity, indemnity and

bonding companies; and similar services regardless of whether or not the performance

thereof calls for the exercise or use of the physical or mental faculties. The phrase 'sale or

exchange of services' shall likewise include:

(1) The lease or the use of or the right or privilege to use any copyright, patent, design or

model, plan secret formula or process, goodwill, trademark, trade brand or other like

property or right;

(2) The lease of the use of, or the right to use of any industrial, commercial or scientific

equipment;

(3) The supply of scientific, technical, industrial or commercial knowledge or information;

(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a

means of enabling the application or enjoyment of any such property, or right as is

mentioned in subparagraph (2) or any such knowledge or information as is mentioned in

subparagraph (3);

(5) The supply of services by a nonresident person or his employee in connection with the

use of property or rights belonging to, or the installation or operation of any brand,

machinery or other apparatus purchased from such nonresident person;

(6) The supply of technical advice, assistance or services rendered in connection with

technical management or administration of any scientific, industrial or commercial

undertaking, venture, project or scheme;

(7) The lease of motion picture films, films, tapes and discs; and

(8) The lease or the use of or the right to use radio, television, satellite transmission and

cable television time.

Lease of properties shall be subject to the tax herein imposed irrespective of the place

where the contract of lease or licensing agreement was executed if the property is leased or

used in the Philippines.

The term “gross receipts” means the total amount of money or its equivalent representing

the contract price, compensation, service fee, rental or royalty, including the amount

charged for materials supplied with the services and deposits and advanced payments

actually or constructively received during the taxable quarter for the services performed or

to be performed for another person, excluding value-added tax.

xxx

[11] First Planters Pawnshop v. Commissioner of Internal Revenue, G.R. No. 174134, July

30, 2008, 560 SCRA 621.

[12] G.R. No. 179085, January 21, 2010, 610 SCRA 514.

[13] G.R. No. 166829, April 19, 2010.

G.R. No. 171138 April 7, 2009

H. TAMBUNTING PAWNSHOP, INC., Petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

D E C I S I O N

QUISUMBING, J.:

This petition for review assails the Decision1 dated June 30, 2005 of the Court of Appeals in

CA-G.R.-SP No. 79116 and its Resolution2 dated January 10, 2006, denying the motion for

reconsideration. The appellate court had modified the Decision3 dated March 18, 2003 of

the Court of Tax Appeals (CTA) in C.T.A. Case No. 6366.

The case stemmed from a Pre-Assessment Notice4 issued by the Commissioner of Internal

Revenue (CIR) against H. Tambunting Pawnshop, Inc. (Tambunting) for, among others,

deficiency documentary stamp tax (DST) of P50,910. Thereafter, the CIR issued an

assessment notice5 with the corresponding demand letters6 for the payment of the DST and

the corresponding compromise penalty for taxable year 1997.

Tambunting filed its written protest to the assessment notice alleging that it was not subject

to documentary stamp tax under Section 1957 of the National Internal Revenue Code (NIRC)

because documentary stamp taxes were applicable only to pledge contracts, and the

pawnshop business did not involve contracts of pledge.

When Tambunting’s written protest was not acted upon by the CIR, the former filed a

petition with the CTA appealing the assessments issued by the CIR. The CTA gave due

course to Tambunting’s petition for review and rendered a Decision, the dispositive portion

of which reads:

WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby PARTIALLY

GRANTED. Accordingly, petitioner is hereby ORDERED to PAY deficiency VAT assessment.…

However, finding that petitioner is not subject to the documentary stamp tax under Section

195 of the Tax Code, Assessment Notice No. 32-97 dated April 11, 2001 for deficiency

documentary stamp tax is hereby CANCELLED and SET ASIDE.

SO ORDERED.8

The CIR’s motion for reconsideration was denied by the CTA. Thus, the CIR elevated the case

to the Court of Appeals. The appellate court ruled in favor of the CIR and decreed:

WHEREFORE, premises considered, Petition for Partial Review by the Commissioner of

Internal Revenue is hereby GRANTED and the assailed March 18, 2003 Decision of the Court

of Tax Appeals, …, in so far as it cancelled the deficiency documentary stamp tax

assessment of Php 50,910.00 against respondent TAMBUNTING, is hereby MODIFIED in that

respondent TAMBUNTING is hereby ordered to pay petitioner Commissioner of Internal

Revenue, the amount of Php50,910.00 as 1997 deficiency documentary stamp tax

assessment, plus 25% surcharge, 20% deficiency interest, and 20% delinquency interest

thereon from May 11, 2001 until fully paid pursuant to Section 248 and 249 (B) of the Tax

Code.

SO ORDERED.9

Tambunting now before us raises the following issue:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

PETITIONER LIABLE FOR DST ON PAWN TICKETS.10

Stated simply, is Tambunting liable for documentary stamp taxes based on the pawn tickets

that it issued?

Petitioner contends that it is the document evidencing a pledge of personal property which

is subject to the DST. A pawn ticket is defined under Section 3 of Presidential Decree No.

11411 as "the pawnbroker’s receipt for a pawn [and] is neither a security nor a printed

evidence of indebtedness." Petitioner argues that since the document taxable under Section

195 must show the existence of a debt, a pawn ticket which is merely a receipt for a pawn is

not subject to DST.

Petitioner further contends that the DST is imposed on the documents issued, not the

"transactions so had or accomplished." It insists that the document to be taxed under the

transaction contemplated should be the pledge agreement, if any is issued, not the pawn

ticket.

On the other hand, the CIR, through the Office of the Solicitor General, argues that Section

195 of the NIRC expressly provides that a documentary stamp tax shall be collected on

every pledge of personal property as a security for the fulfillment of the contract of loan.

Since the transactions in a pawnshop business partake of the nature of pledge transactions,

then pawn transactions evidenced by pawn tickets, are subject to documentary stamp

taxes.

The CIR further argues that the pawn ticket is the pledge contract itself and thus, it is

subject to documentary stamp tax.

After considering the submission of the parties, we find that the instant petition lacks merit.

First, on the subject of pawn tickets, the Bangko Sentral ng Pilipinas Manual of Regulations

for Non-Bank Financial Institutions12 provides:

Sec. 4322P Pawn Ticket. Pawnshops shall at the time of the loan, deliver to each pawner a

pawn ticket which shall contain the following:

a. Name and residence of the pawner;

b. Date the loan is granted;

c. Amount of the principal loan;

d. Interest rate in percent;

e. Period of maturity;

f. Description of the pawn;

g. Expiry date of redemption period;

h. Signature of the pawnshop’s authorized representative;

i. Signature or thumbmark of the pawner or his authorized representative; and

j. Such other terms and conditions as may be agreed upon between the pawnshop and the

pawner.

Notably, a pledge is an accessory, real and unilateral contract by virtue of which the debtor

or a third person delivers to the creditor or to a third person movable property as security

for the performance of the principal obligation, upon fulfillment of which the thing pledged,

with all its accessions and accessories, shall be returned to the debtor or to the third

person.13 The pawn ticket is required to contain the same essential information that would

be found in a pledge agreement. Only the nomenclature of the requirements in the pawn

ticket is changed to refer to the specific kind of pledge transactions undertaken by

pawnshops.1avvphi1.zw+ The property or thing pledged is referred to as the pawn, the

creditor (pledgee) is referred to as the pawnee14 and the debtor (pledgor) is referred to as

the pawner.

Petitioner’s explanations fail to dissuade us from recognizing the pawn ticket as the

document that evidences the pledge. True, the pawn ticket is neither a security nor a

printed evidence of indebtedness. But, precisely being a receipt for a pawn, it documents

the pledge. A pledge is a real contract, hence, it is necessary in order to constitute the

contract of pledge, that the thing pledged be placed in the possession of the creditor, or of a

third person by common agreement.15 Consequently, the issuance of the pawn ticket by the

pawnshop means that the thing pledged has already been placed in its possession and that

the pledge has been constituted.

Second, on the subject of documentary stamp tax, the NIRC provides:

SEC. 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… (Emphasis

supplied.)

SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. – On every mortgage or

pledge of lands, estate, or property, real or personal, 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 and owing or forborne to be paid, being payable,

and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or

otherwise converted into money which shall be and intended only as security, either by

express stipulation or otherwise, there shall be collected a documentary stamp tax at the

following rates:

(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos

(P20.00).

(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five

thousand pesos (P5,000), an additional tax of Ten pesos (P10.00). (Emphasis supplied.)

x x x x

The law imposes DST on documents issued in respect of the specified transactions, such as

pledge, and not only on papers evidencing indebtedness. Therefore, a pawn ticket, being

issued in respect of a pledge transaction, is subject to documentary stamp tax.

Third, the issue in this case is not novel. The question of whether pawnshop transactions

evidenced by pawn tickets are subject to documentary stamp taxes has been answered in

the affirmative in Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue.16

There the Court held:

x x x x

Section 195 of the National Internal Revenue Code (NIRC) imposes a DST on every pledge

regardless of whether the same is a conventional pledge governed by the Civil Code or one

that is governed by the provisions of P.D. No. 114. All pledges are subject to DST, unless

there is a law exempting them in clear and categorical language.…

x x x x

… No law on legal hermeneutics could change the fact that the entries contained in a

pawnshop ticket spell out a contract of pledge and that the exercise of the privilege to

conclude such a contract is taxable under Section 195 of the NIRC.17

Even so, we note that the present case was filed with the Supreme Court before September

11, 2006, when the Court resolved for the first time the matter of surcharges and interest for

failure to pay documentary stamp taxes on pledge transactions in Michel J. Lhuillier

Pawnshop, Inc. v. Commissioner of Internal Revenue. Hence, as in the said case, we can still

ascribe good faith to petitioner. Consequently, the imposition of surcharges and interest in

the present case must also be deleted.18

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated June 30, 2005 of the

Court of Appeals in CA-G.R.-SP No. 79116 is AFFIRMED with the MODIFICATION that

surcharges and interest imposed on the deficiency documentary stamp tax assessment are

DELETED.

SO ORDERED.

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

WE CONCUR:


Associate Justice

DANTE O. TINGA

Associate Justice PRESBITERO J. VELASCO, JR.

Associate Justice

ARTURO D. BRION

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before

the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s

Attestation, I certify that the conclusions in the above Decision had been reached in

consultation before the case was assigned to the writer of the opinion of the Court’s

Division.

REYNATO S. PUNO

Chief Justice

Footnotes

1 Rollo, pp. 42-50. Penned by Associate Justice Vicente Q. Roxas, with Associate Justices

Portia Aliño-Hormachuelos and Juan Q. Enriquez, Jr. concurring.

2 Id. at 52-53.

3 Id. at 54-70.

4 Id. at 137.

5 Id. at 141.

6 Id. at 143-146.

7 SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. – On every mortgage or




and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or



following rates:


(P20.00).


thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).

x x x x

8 Rollo, p. 69.

9 Id. at 50.

10 Id. at 212.

11 Regulating the Establishment and Operation of Pawnshops, done on January 29, 1973.

12 P Regulations, updated as of December 2007.

13 Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue, G.R. No. 166786,

May 3, 2006, 489 SCRA 147, 153.

14 Presidential Decree No. 114 (1973),

Sec. 3. Definitions.–As used in this Decree, unless the context otherwise requires, the

following terms shall have the following meanings:

"Pawnshop" shall refer to a person or entity engaged in the business of lending money on

personal property delivered as security for loans …

x x x x

"Pawnee" shall refer to the pawnshop or pawnbroker.

x x x x

15 Civil Code of the Philippines, Art. 2093.

16 Supra note 13; G.R. No. 166786, September 11, 2006, 501 SCRA 450.

17 Id. at 454-456.

18 Id. at 460.

The Lawphil Project - Arellano Law Foundation

DISSENTING OPINION

With all due respect to my well-esteemed colleague, I take a contrary position to the

majority opinion that the pawn ticket is subject to Documentary Stamp Tax (DST).

The ponencia while admitting that the pawn ticket is neither a security nor a printed

evidence of indebtedness however asseverates that the pawn ticket, being the receipt for a

pawn, documents the pledge.

I beg to disagree.

The pawn ticket is simply defined as the "pawnbroker’s receipt for a pawn."1 PD 114

declares that "it is neither a security nor a printed evidence of indebtedness."2 Section 12 of

said law clearly explains the nature of the pawn ticket, thus:

SEC. 12. Pawn ticket.—Every pawnbroker shall, at the time of every such loan or pledge,

deliver to each person pawning or pledging any article or thing a memorandum or ticket

signed by such pawnbroker and containing the substance of the record required to be kept

in such pawnbroker’s memorandum book in section eleven hereof, excluding the description

of the person so pawning or pledging such article or thing, and no compensation of any kind

whatsoever shall be received by any pawnbroker for any such memorandum of ticket.

Thus the ticket is simply a receipt and nothing more. It does NOT document the pledge.

Such purpose is accomplished by the pawnbroker in the memorandum book which is

governed by Sec. 11 which reads:

SEC. 11. Maintenance of records.—Every pawnbroker shall keep a memorandum book in

which shall be entered, in ink, at the time of each loan or pledge, an accurate account and

description, in Pilipino or English with corresponding translation in the local dialect of every

pawn, the amount of money loaned thereon, the date of pawning or pledging the same, the

rate of interest to be pain on the loan, and the name and residence of each pawner,

together with a particular description of such pawner, including his or her nationality, sex,

and general appearance, and no pawnbroker or other person shall alter or erase any entry

made in such book. Every person pawning or pledging any article or thing with a pawnbroker

shall sign his name and give his address to said pawnbroker and such name and address

shall be made part of the record heretofore described in this section: Provided, That a

person who is unable to write shall imprint his thumbmark, and his name shall be written by

a competent person, who shall sign his own name as witness to said thumbmark.

From the foregoing, the entries in the memorandum book document the loan or pledge

agreement and not the pawn ticket.

PD 114 does not consider a pawn ticket an evidence of indebtedness or a security for the

payment of any sum of money, since it is in the possession of the pawnee. This is

differentiated from a promissory note, bond or debenture which is in the possession of the

creditor. If the pawn ticket is an evidence of indebtedness, it would only be logical for the

pawnbroker to hold on the "ticket" as his evidence. This does not obtain in the pawnshop

industry. The inescapable conclusion is that a "pawnshop ticket" is merely a pawnshop’s

receipt for a pawn. It does not document or substantiate the existence of a loan as the loan

transaction itself is required to be registered in the Loans Extended Register per the Manual

of Regulations for Non-Bank Financial Institutions. The pawn ticket, not being a document or

instrument evidencing an indebtedness nor a security, then it is not subject to DST.

Moreover, the ponencia relies on Sec. 173 of the National Internal Revenue Code (NIRC)

which reads:

SEC. 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 x x x.

(Emphasis supplied.)

Based on the abovequoted provision, the ponencia argues that the "law imposes DST on

documents issued in respect of the specified transactions, such as pledge and not only on

papers evidencing indebtedness."

Moreover, the ponencia relies on Sec. 195 of the NIRC as basis for its conclusion that the

pledge contained in the pawn ticket is subject to DST, thus:

SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust.—On every mortgage or




and on any conveyance of land, estate, or property whatsoever, in trust or to be sold,



following rates:


(P20.00).


thousand pesos (P5,000), an additional tax of Ten pesos (P10.00). (Emphasis supplied.)

x x x x

While it can be conceded that a pawn ticket is a paper issued in respect of the pledge, it is

my view that a pawn ticket is excluded from the coverage of Sec. 195 of the NIRC and the

pledge that relates to the ticket is an exempt transaction anchored on PD 114, a special law

which must prevail over the NIRC, a general law.

A pawn transaction is a kind of pledge covered by a special law—PD 114 regulating the

establishment and operation of pawnshop (Article 2123). All other pledges are governed by

Arts. 2085 up to 2122 of the Civil Code. Art. 2096 requires that a pledge must be in a public

instrument if the pledge has to take effect against third persons. Art. 2096 reads:

Article 2096. A pledge shall not take effect against third persons if a description of the thing

pledged and the date of the pledge do not appear in a public instrument.

While Art. 1358 does not require a pledge in a public document, it requires that all other

contracts where the amount involved exceeds five hundred pesos must appear in writing,

even a private one.

It is my submission that the "documents loan agreements, instruments and papers" referred

to in Sec. 173 of the NIRC applies only on pledges covered by a written document under Art.

1358 or a public instrument under Art. 2096 where an agreement is clearly reflected. The

pawn ticket by itself cannot be a document, instrument or paper under Sec. 173 because of

the explicit definition of a pawn ticket that it is neither a security nor a written evidence of

indebtedness. It is a ticket evidencing the receipt of the thing pledged but does not embody

the agreement of pledge on the thing pawned and the loan secured by the pledge. It is

merely the receipt of the pawned item.1avvphi1

With respect to the pledge covered by a pawn ticket, PD 114 does not require a contract but

simply entries in the memorandum book and the issuance of a pawn ticket. Why is this so? It

is because the document evidencing the loan and pledge was made to be simple as it

involves only small borrowers who may not be able to comprehend the legal terms in a

contract of pledge. Secondly, a pawn ticket shall not be imposed any DST because the policy

of the law is to alleviate the financial condition of small borrowers who are mainly poor or

who do not have sufficient income. Thus one of the policies of PD 114 is for pawnshops "to

provide an additional source of credit especially for small borrowers left unserved by the

banking and other financial institutions in the country." Pursuant thereto, a pawn ticket was

defined simply as a pawnbrokers’ receipt for the pawn and it is neither a security nor a

printed evidence of indebtedness. While the contents of a pawn ticket as prescribed by CBC

No. 374 clearly demonstrate that it is a printed evidence of indebtedness as the amount of

the principal loan, the period of maturity and interest rate are reflected in the ticket, still the

law defines it otherwise, revealing the clear intent of Congress to exempt the pawn ticket

and the pledge agreement from the coverage of DST. Moreover, the ticket also describes the

pawned item yet PD 114 does not consider it a security. This does not make sense. The only

logical explanation to such a seeming aberration is the intent of Congress to exempt the

pawn transaction from DST.

More importantly, the history of the statutes on DST easily reveals that Congress never

intended to impose DST on a pawn ticket or a pawn transaction. Pawing was never

mentioned in the laws imposing DST nor its amendments, viz:

LAW PERTINENT PROVISIONS

ACT NO. 2339

(An Act Revising And Consolidating The Laws Relative To Internal Revenue 1), 27 February

1914

SECTION 30. Stamp Tax Upon Documents and Papers.—Upon documents, instruments, and

papers, and upon acceptances, assignments, sales, and transfers of the obligation, right, or

property incident thereto documentary taxes for and in respect of the transaction so had or

accomplished shall be paid as hereinafter prescribed, by the persons making, signing,

issuing, accepting, or transferring the same, and at the time such act is done or transaction

had:

x x x x

(w) On every mortgage or pledge of lands, estate, or property, real or personal, 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 and owing or forborne

to be paid being payable, and on any conveyance of land, estate, or property whatsoever in

trust or to be sold or otherwise converted into money, which shall be and intended only as

security, either by express stipulation or otherwise:

1. When the amount for which the mortgage or deed of trust is given is not less than one

thousand pesos nor more than three thousand pesos, fifty centavos;

2. On each three thousand pesos, or fractional part thereof, in excess of three thousand

pesos, an additional tax of fifty centavos;

COMMONWEALTH ACT NO. 466

(An Act To Revise, Amend And Codify The Internal Revenue Laws Of The Philippines), 15 June

1939

SECTION 232. Stamp tax on mortgages, pledges, and deeds of trust.—On every mortgage or



of money lent at the time or previously due and owing or forborne to be paid being payable,

and on any conveyance of land, estate, or property, whatsoever, in trust or to be sold, or

otherwise converted into money, which shall be and intended only as security, either by


following rates:

(a) When the amount for which the mortgage or deed of trust is given exceeds one thousand

pesos and does not exceed three thousand pesos, one peso.

(b) On each three thousand pesos or fractional part thereof in excess of three thousand

pesos, an additional tax of one peso.

REPUBLIC ACT NO. 40

(An Act To Amend Certain Sections Of The National Internal Revenue Code, Relative To

Documentary Stamp Taxes), 1 October 1946

SEC. 232. Stamp tax on mortgages, pledges, and deeds of trust.—On every mortgage or




and on any conveyance of land, estate, or property, whatsoever in trust or to be sold, or



following rates:

(a) When the amount for which the mortgage or deed of trust is given exceeds one thousand

pesos and does not exceed three thousand pesos, one peso and fifty centavos.


pesos, an additional tax of one peso and fifty centavos.

REPUBLIC ACT NO. 567

(An Act To Amend Title VI Of Commonwealth Act Numbered Four Hundred And Sixty-Six,

Otherwise Known As The National Internal Revenue Code), 31 August 1950

SECTION 5. Section two hundred and thirty-two of Commonwealth Act Numbered Four

hundred and sixty-six, as amended by section twenty-one of Republic Act Numbered Forty,

is hereby further amended to read as follows:

Sec. 232. Stamp tax on mortgages, pledges, and deeds of trust.—On every mortgage or




and on any conveyance of land, estate, or property, whatsoever, in trust or to be sold, or



following rates:

(a) When the amount for which the mortgage or deed or trust is given exceeds one thousand

pesos and does not exceed three thousand pesos, one peso and fifty centavos.


pesos, an additional tax of one peso and fifty centavos.

On any mortgage, pledge, or deed of trust, where the same shall be made as a security for

the payment of a fluctuating account or future advances without fixed limit, the

documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the

amount actually loaned or given at the time of the execution of the mortgage, pledge or

deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed

of trust, additional documentary stamp tax shall be paid which shall be computed on the

basis of the amount advanced or loaned at the rates specified above: Provided, however,

That if the full amount of the loan or credit granted under the mortgage, pledge, or deed of

trust, the documentary stamp tax prescribed in this section shall be paid and computed on

the full amount of the loan or credit granted.


(An Act To Further Amend Section Two Hundred Twenty-Seven Of The National Internal

Revenue Code), 22 June 1957

The law increased the rate of DST on bills of ladings or receipt.


(An Act Amending Certain Provisions Of The National Internal Revenue Code, As Amended),

4 August 1969

The law increased the DST rate on some of the documents mentioned in CA 466. The law

also introduced additional documents and papers not subject to stamp tax.

PRESIDENTIAL DECREE NO. 69

(Amending Certain Sections Of The National Internal Revenue Code), 24 November 1972

DST of the Tax Code, there was no amendment on Section 232.

PRESIDENTIAL DECREE NO. 1158

(A Decree To Consolidate And Codify All The Interna