Legal basis and amendment focus
- The regulations are issued pursuant to Section 4 of Republic Act No. 8424 and Section 244 of the National Internal Revenue Code of 1997.
- They implement the provisions of Republic Act No. 9243, which rationalizes DST provisions under Title VII (Documentary Stamp Tax) of the National Internal Revenue Code of 1997, as amended.
- The regulations operationalize the structural change in the Code by revising and renumbering DST provisions for specific categories of documents and instruments.
Section renumbering under DST Title VII
- The regulations revise the DST sections under Title VII (Documentary Stamp Tax) of the National Internal Revenue Code of 1997, including the following renumbered and amended sections:
- Section 173: Stamp Taxes upon Documents, Loan Agreements, Instruments and Papers.
- Section 174: Stamp Tax on Original Issue of Shares of Stock.
- Section 175: Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or Certificates of Stock.
- Section 176: Stamp Tax on Bonds, Debentures, Certificates of Stock or Indebtedness Issued in Foreign Countries.
- Section 177: Stamp Tax on Certificates of Profits or Interest in Property or Accumulations.
- Section 178: Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and other Instruments.
- Section 179: Stamp Tax on All Debt Instruments.
- Section 180: Stamp Tax on All Bills of Exchange or Drafts.
- Section 181: Stamp Tax Upon Acceptance of Bills of Exchange and Others.
- Section 182: Stamp Tax on Foreign Bills of Exchange and Letters of Credit.
- Section 183: Stamp Tax on Life Insurance Policies.
- Section 184: Stamp Tax on Policies of Insurance Upon Property.
- Section 185: Stamp Tax on Fidelity Bonds and Other Insurance Policies.
- Section 186: Stamp Tax on Policies of Annuities and Pre-Need Plans.
- Section 187: Stamp Tax on Indemnity Bonds.
- Section 188: Stamp Tax on Certificates.
- Section 189: Stamp Tax on Warehouse Receipts.
- Section 190: Stamp Tax on Jai-alai, Horse Race Tickets, Lotto or Other Authorized Numbers Games.
- Section 191: Stamp Tax On Bills of Lading or Receipts.
- Section 192: Stamp Tax on Proxies.
- Section 193: Stamp Tax on Powers of Attorney.
- Section 194: Stamp Tax on Leases and Other Hiring Agreements.
- Section 195: Stamp Tax on Mortgages, Pledges and Deeds of Trust.
- Section 196: Stamp Tax on Deeds of Sale and Conveyances of Real Property.
- Section 197: Stamp Tax on Charter Parties and Similar Instruments.
- Section 198: Stamp Tax on Assignments and Renewals of Certain Instruments.
- Section 199: Documents and Papers Not Subject to Stamp Tax.
DST on original issue of shares
- Section 174 imposes DST on every original issue of shares of stock by any association, company, or corporation, whether on organization, reorganization, or for any lawful purpose.
- Section 174 requires a documentary stamp tax of PHP 1.00 on each PHP 200 of the par value, or fractional part thereof, of the shares issued.
- Section 174 provides that for shares of stock without par value, the DST is based on the actual consideration for the issuance.
- Section 174 provides that for stock dividends of shares without par value, the DST base is the actual value represented by each share.
- Section 174 treats shares as issued upon the corporation’s acceptance of the stockholder’s subscription, with the entire subscribed shares considered issued for DST purposes even if not fully paid.
- Section 174 states that delivery of certificates to stockholders is not essential for the DST to accrue.
- Section 174 applies the DST regardless of restrictions on exercise of ownership attributes, including those imposed by articles and/or by-laws, Securities and Exchange Commission, stockholder agreements, court orders, or similar arrangements.
DST on sales and transfers of shares
- Section 175 imposes DST on all sales, agreements to sell, memoranda of sales, deliveries, or transfer of shares or certificates of stock in any association, company, or corporation.
- Section 175 covers transfers by assignment in blank, delivery, or any paper, agreement, memorandum, or other evidence of transfer or sale, including instruments that entitle the holder to benefits from the stock or secure future payments or future stock transfers.
- Section 175 requires a documentary stamp tax of PHP 0.75 on each PHP 200 of the par value, or fractional part thereof, of the stock.
- Section 175 requires that only one tax be collected on each sale or transfer of stock from one person to another, regardless of whether a certificate is issued, endorsed, or delivered.
- Section 175 provides that for shares without par value, the DST is equivalent to 25% (25%) of the documentary stamp tax paid upon the original issue of the same stock.
- The regulations require that all transfer of shares of stock of a domestic corporation be subject to DST upon execution of the deed transferring ownership or rights, or upon delivery/assignment/endorsement in favor of another.
- The regulations provide that no transfer of shares may be recorded unless DST thereon has been duly paid in accordance with Section 201 of the Code.
- The regulations treat as taxable any sale or exchange involving an actual or constructive transfer of beneficial ownership, manifested by clear exercise of ownership attributes by the transferee, or changes in name entries in the certificate or Stock and Transfer Book, or any registry entry including scripless registry entries.
- The regulations exempt transfers from taxation when certificates move from a resigned trustee to a newly appointed trustee but the certificates remain in the name of the cestui que trust or resigned trustee such that the new trustee is only a depository.
- The regulations exempt transfers to nominees to qualify them to sit in the board or perform acts for the corporation only upon proof of:
- a duly executed Nominee Agreement showing the purpose of the transfer,
- transfer without consideration other than the nominee’s undertaking to represent only the beneficial owner,
- transfer in trust.
- The regulations treat agreements to sell and executory contracts for sale or transfer as taxable, but provide that if DST has been paid on the agreement or memoranda of sale, the subsequent actual sale or transfer is no longer subject to DST.
DST on all debt instruments
- Section 179 imposes DST on every original issue of debt instruments at PHP 1.00 on each PHP 200 of the issue price of the debt instrument, or fractional part thereof.
- Section 179 provides a proportional DST for debt instruments with terms of less than one (1) year, computed based on the ratio of its term in days to 365 days.
- Section 179 mandates that only one documentary stamp tax be imposed on either the loan agreement or promissory notes issued to secure such loan.
- Section 179 defines debt instrument as instruments representing borrowing and lending transactions including:
- debentures,
- certificates of indebtedness,
- due bills,
- bonds,
- loan agreements, including those signed abroad where the object of contract is located or used in the Philippines,
- instruments and securities issued by the government or any of its instrumentalities,
- deposit substitute debt instruments,
- certificates or other evidences of deposits drawing interest significantly higher than regular savings deposit (considering deposit size and risks),
- certificates or other evidences of deposits drawing interest with a specific maturity date,
- orders for payment of any sum of money otherwise than at sight or on demand,
- promissory notes, whether negotiable or non-negotiable,
- except bank notes issued for circulation.
- The regulations treat issue price as the face value of the debt instrument for DST purposes.
- The regulations impose DST only on every original issue, so secondary-market sale of a debt instrument is not subject to DST.
- Section 179 requires DST computation rules based on term:
- if the term is less than one (1) year, compute using term-in-days / 365.
- if the term is one year or longer, compute based on issue price without proportional adjustment.
DST on domestic bills of exchange
- Section 180 imposes DST on all bills of exchange (between points within the Philippines) or drafts.
- Section 180 requires a documentary stamp tax of PHP 0.30 on each PHP 200 of the face value of the bill of exchange or draft, or fractional part thereof.
DST base and rates for life insurance
- Section 183 imposes DST on all policies of insurance or other instruments by any name whereby life insurance is made or renewed upon one or more lives.
- Section 183 requires a documentary stamp tax of PHP 0.50 on each PHP 200, or fractional part thereof, of the amount of premium collected.
- The DST in Section 183 applies only to life insurance policies issued on or after March 20, 2004, the effectivity of Republic Act No. 9243.
- The DST due on a life insurance policy is due and collected every time there is an insurance premium collection, including premiums paid or collected beyond the year the policy was taken out.
- Insurance premium collection includes premiums paid or remitted:
- directly by the insured,
- by applying cash surrender value,
- by applying dividend earned,
- by other modes of payment,
- for the original policy or amendments thereto.
- The regulations provide transitional coverage: life insurance policies issued before March 20, 2004 and included in an inventory required for submission are covered by the old Section 183 rules, and DST under the amended base is not collected if the DST due under the old rules has already been fully paid.
- The regulations treat any increase in coverage from year to year or additional riders attached to existing policy as a new issuance, and the related premium is subject to DST based on Section 183.
- Life insurance companies must submit an inventory of issued, outstanding, and valid life insurance policies as of March 19, 2004 to the relevant Revenue District Office / Large Taxpayers Service / Large Taxpayers District Office where the taxpayer is registered, on or before January 31, 2005.
- The inventory must be submitted in hard and soft copy, and the hard copy must be made under oath as to completeness, truth, and accuracy by a duly authorized officer or representative.
- The regulations provide that failure to submit the inventory on time makes the covered life insurance policies subject to DST based on premiums collected under the amended law.
DST on annuities and pre-need plans
- Section 186 imposes DST on all policies of annuities, or other instruments by any name, whereby an annuity may be made, transferred, or redeemed.
- Section 186 requires a documentary stamp tax of PHP 0.50 on each PHP 200, or fractional part thereof, of the premium or installment payment or contract price collected.
- Section 186 imposes DST on pre-need plans at PHP 0.20 on each PHP 200, or fractional part thereof, of premium or contribution collected.
- The DST in Section 186 applies only to annuities and pre-need plans issued on or after March 20, 2004.
- The DST due on such annuities and pre-need plans is due and collected every time there is a premium collection, including premiums paid or collected beyond the year the annuity or pre-need plan was purchased.
- The regulations provide transitional coverage: annuities and pre-need plans issued before enactment of Republic Act No. 9243 and listed in the inventory required under the regulations are subject to the old Section 186 rates and base, and no DST is due under the amended section if DST due under the old section has already been fully paid.
- Taxpayers issuing annuities and pre-need plans must submit an inventory of issued, outstanding, and valid annuities and pre-need plans as of March 19, 2004 to the relevant Revenue District Office / Large Taxpayers Service / Large Taxpayers District Office where the taxpayer is registered, on or before January 31, 2005.
- The inventory must be submitted in hard and soft copy, and the hard copy must be made under oath as to completeness, truth, and accuracy by a duly authorized officer or representative.
- The regulations provide that failure to submit the listings within the required period makes the covered annuities and pre-need plans subject to DST based on premium collected under the amended law.
DST exemptions for specified documents
- Section 199 exempts the following instruments, documents, and papers from DST, subject to the categories and conditions stated:
- 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, organized and conducted solely by members for exclusive member benefit and not for profit.
- Certificates of oaths administered to a government official in official capacity or acknowledgments by government officials in official duties; written appearances in courts by government officials in official capacity; certificates on authenticity of papers required to be filed in court; papers and documents filed in courts by or for national/provincial/city/municipal governments; affidavits of poor persons for proving poverty; statements and compulsory information required by government rules for statistical purposes exclusively for the bureau or office filing them and not for the benefit of the filer; certified copies and certificates placed upon documents for national/provincial/city/municipal governments made at the instance and for the sole use of another government branch; and certificates of assessed value of lands not exceeding PHP 200 furnished by provincial/city/municipal treasurers for registration of title.
- Borrowing and lending of securities executed under the Securities Borrowing and Lending Program of a registered exchange or under regulations of the appropriate regulatory authority, provided the agreement is covered by a master securities borrowing and lending agreement acceptable to the regulatory authority, and the agreement is duly registered and approved by BIR.
- Loan agreements or promissory notes executed by an individual for purchase on installment for personal use or for the family’s use and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture, where the aggregate does not exceed PHP 250,000 or such other amount determined by the Secretary of Finance.
- The Secretary of Finance-set amount must follow a relevant price index but must not exceed 10% of the current amount and must remain in force at least for three (3) years.
- Sale, barter or exchange of shares of stock listed and traded through the local stock exchange for five (5) years from the effectivity of the Act.
- Assignment or transfer of any mortgage, lease or policy of insurance, or renewal/continuance of any agreement/contract/charter/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.
- Fixed income and other securities traded in the secondary market or through an exchange.
- Derivatives, with repurchase agreements and reverse repurchase agreements treated similarly as derivatives.
- Interbranch or interdepartmental advances within the same legal entity.
- All forebearances arising from sales or service contracts including credit card and trade receivables, limited to those executed by the seller or service provider itself.
- Bank deposit accounts without a fixed term or maturity.
- Contracts, deeds, documents and transactions related to the conduct of business of the Bangko Sentral ng Pilipinas.
- Transfer of property pursuant to Section 40(C)(2) of the National Internal Revenue Code of 1997, as amended.
- Interbank call loans with maturity of not more than seven (7) days to cover deficiency in reserves against deposit liabilities, including those between banks and quasi-banks.
- The regulations clarify that exemption for derivatives under Section 199(h) applies only to derivatives issued by entities duly licensed by the Bangko Sentral ng Pilipinas (BSP) to issue and trade in derivatives, and whose issuance is duly authorized by the BSP.
- The regulations clarify that the exemption for bank deposit accounts without fixed term or maturity applies only to deposits not qualifying under Section 5 of these regulations.
- The regulations clarify that the exemption for transfer of property under Section 40(c)(2) refers to DST due on the deed transferring the property, while shares of stock issued in exchange for such property are subject to DST due under Section 174 if they are original issues.
- The regulations clarify that interbank call loans exempt under Section 199(n) must be made strictly to cover deficiency in reserves against deposit liabilities.
- The regulations clarify that for purposes of Section 199(g), the reference to exemption applies exclusively to debt instruments.
Electronic documents treated as written
- The DST rates imposed under the National Internal Revenue Code, as amended by Republic Act No. 9243, apply to all documents not expressly exempted.
- DST applies to documents in electronic form notwithstanding that form.
- Under Republic Act No. 8792 (Electronic Commerce Act), electronic documents are treated as the functional equivalent of written documents under existing laws, and issuance of electronic documents is treated as issuance of a written document subject to DST.
Repeal of inconsistent rules
- All existing rules and regulations, or parts thereof, that are inconsistent with these regulations are repealed, amended, or modified accordingly.