Rationalizing Documentary Stamp Tax Act

Legal basis and coverage provisions amended

The regulation is promulgated pursuant to Section 4 and Section 245 of the National Internal Revenue Code (NIRC), as amended.
The regulation is also promulgated in relation to Section 23 of Republic Act No. 7660, which authorizes the issuance of implementing rules.
The implementing focus is on rationalizing documentary stamp tax structure by amending rules in Title VII of the NIRC, including the cited provisions Sections 173, 174, 175, 176, 178, 179, 180, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196, and 197.
The regulation sets operative tax treatment rules that correspond to documentary stamp tax bases and rates under the NIRC provisions named and to Republic Act No. 7660.

Policy and legislative intent

The regulations give effect to Republic Act No. 7660, which rationalizes the structure and administration of the documentary stamp tax.
The operative function of the regulations is to administer documentary stamp tax across taxable documents and transactions governed by Title VII of the NIRC, as amended.

Definitions and interpretive standards

“Act” means Republic Act No. 7660. Section 3(a)
“Loan agreement” means a written contract where one party delivers money or another consumable thing on the condition the same amount of the same kind and quality shall be paid, and it includes credit facilities evidenced by credit memo, advice, or drawings. Section 3(b)
A loan agreement under Section 180 and a mortgage under Section 195 refer to distinct and separate instruments, where a loan agreement is taxed under Section 180 and a deed of mortgage is taxed under Section 195. Section 3(b)
“Securities” includes a broad list of instruments and interests, including bonds, debentures, notes, evidence of indebtedness, shares, certificates of interests or participation, certificates of deposit for security, collateral trust/equipment trust certificates, voting trust certificates, rights to subscribe or buy or sell, and many other investment/contract forms; it also includes commercial papers evidencing indebtedness and membership/plan instruments. Section 3(c)
“When the obligation or right arises from Philippines sources” means the obligation/right arises from sources within the Philippines. Section 3(d)
“The property is situated in the Philippines” means the real or personal property is located in the Philippines. Section 3(e)
“Promissory note” means an instrument—negotiable or non-negotiable—where the maker agrees to pay a sum certain in money (or equivalent) at a definite time. Section 3(f)
“Lotto” refers to a numbers game authorized by law, including but not limited to listed variants such as lottery, drawing, sweepstakes, raffle, pick six/pick four, tombola, numbers pool, Chinese lottery, and tontine. Section 3(g)
“Beginning 1996” means beginning January 1, 1996. Section 3(h)
“At the same time such act is done or transaction had” means the same date the document is executed—made, signed, issued, accepted, or transferred. Section 3(i)
“Government instruments or securities” refer to bonds, debentures, notes, certificates, or other evidence of indebtedness issued by government or any of its political subdivisions. Section 3(j)

Scope, persons liable, and situs rules

Documentary stamp taxes attach to documents, instruments, loan agreements, and papers, and to acceptances, assignments, sales, and transfers of the obligation/right/property incident thereto. Section 2
Payment is required by the person who makes, signs, issues, accepts, or transfers the taxable instrument/document. Section 2
Tax liability applies wherever the document is made, signed, issued, accepted, or transferred when the obligation/right arises from Philippine sources or the property is situated in the Philippines, and at the same time the act is done or transaction had. Section 2
If one party to the taxable document enjoys an exemption, the other party not exempt is directly liable for the documentary stamp tax. Section 2

Time and method of payment rules

The documentary stamp tax is paid by purchasing and affixing documentary stamps to the taxed document/instrument (or to other papers indicated by law or regulations as proper recipients). Section 4
Cancellation must be done by writing, stamping, or perforating the cancellation date across the face of each stamp such that part of the cancellation appears on the stamp and part on the document to which it is attached. Section 4
When the tax due is ten pesos (P10.00) or more, the tax is paid by the taxpayer at the time the act is done or transaction had without affixing actual stamps on the document.
For tax payment of P10.00 or more, the document must show the information from the evidence of payment: official receipt number, date of payment, amount paid, and name of the payor, written on the face of the document or a suitable space. Section 4

Substantive tax rates and transaction-specific rules

Certificates of stock (fully paid shares): A documentary stamp tax is imposed only on fully paid shares at two pesos (P2.00) on each two hundred pesos (or fractional part) of the par value; for stock without par value, the base is actual consideration received; for stock dividends, the base is the actual value represented by each share. Section 5
The tax on share issuance is imposed on the privilege of issuing shares and accrues at the time shares are issued, so delivery of certificates to stockholders is not essential for attachment. Section 5
Loan agreements (general rule): All loan agreements are subject to documentary stamp tax of thirty centavos (P0.30) on each two hundred pesos (or fractional part) of the face value, for loan agreements made or signed in the Philippines, or abroad where the obligation/right arises from Philippine sources or the property/object is located or used in the Philippines. Section 6
Loan agreements with no formal written loan documents/notes: When credit facilities are not covered by formal loan agreements or promissory notes, the tax base is the amount of drawings or availment, evidenced by credit/debit memo, advice, or drawings via any form of check or withdrawal slip, under Section 180. Section 6
Simultaneous loan agreement and promissory note: When a loan agreement and promissory note are simultaneously issued/executed and the loan is secured by the promissory note, only one documentary stamp tax is imposed on either the loan agreement or the promissory note—whichever yields the higher tax. Section 7
Loan agreement/promissory note plus pledge/mortgage in one instrument: When one instrument covers both the loan agreement/promissory note and the pledge/mortgage, the tax under Section 195 is paid and computed on the full amount of the loan or credit granted, treating the instrument as covering only one taxable transaction subject to the higher tax. Section 8
Installment purchases by individuals—exemption threshold: Loan agreements or promissory notes executed by an individual for purchase on installment for personal use or family use (not for business/resale/barter/hire) are exempt from documentary stamp tax under Section 180 when the aggregate does not exceed two hundred fifty thousand (P250,000.00) pesos. Section 9
Aggregation for installment exemption: Where several promissory notes secure the same loan agreement or pertain to the same object, the value is aggregated and treated as one. Section 9
When installment exceeds the threshold: If the purchase on installment exceeds P250,000, the whole purchase price is subject to documentary stamp tax under Section 180. Section 9
Government instruments and securities: Instruments and securities issued by government or any of its instrumentalities are subject to P0.30 on each two hundred pesos (or fractional part) of face value. Section 10
Bonds, debentures, and certificates of indebtedness: Documentary stamp tax of P1.50 on each two hundred pesos (or fractional part) of face value. Section 174
Original issue of certificates of stock: P2.00 on each two hundred pesos (or fractional part) of par value; for stock without par value, based on actual consideration received; for stock dividends, based on actual value represented by each share. Section 175
Sales/agreements to sell/deliveries/transfers of due-bills and shares: Documentary stamp tax of P1.00 on each two hundred pesos (or fractional part) of par value of due-bills/certificates/obligations/shares.
- Only one tax is collected on each sale or transfer of stock or securities from one person to another regardless of issuance/endorsement/delivery in pursuance of the transfer. Section 176
- For stock without par value, the tax is equivalent to twenty-five per centum of the documentary stamp tax paid on the original issue of the stock. Section 176
- The rate increases to P1.50 beginning 1996. Section 176
Certificates of profits/interest in property or accumulations: Documentary stamp tax of P0.50 on each two hundred pesos (or fractional part) of face value; transfers of such certificates/memoranda are similarly taxed. Section 178
Bank checks, drafts, and non-interest certificates of deposit (at sight/demand): Documentary stamp tax of P1.25 per instrument; the tax increases to P1.50 beginning 1996. Section 179
Loan agreements/promissory notes/bills/drafts/instruments and securities of government + interest-bearing certificates of deposit and others not payable at sight/demand:
- Tax is P0.30 on each two hundred pesos (or fractional part) of face value for covered instruments, including:
  - Loan agreements signed abroad where the object is located or used in the Philippines,
  - Bills of exchange between points within the Philippines,
  - Drafts and instruments/securities issued by government instrumentalities,
  - Certificates of deposits drawing interest, and
  - Others for payment otherwise than at sight/on demand,
  - Promissory notes (negotiable or non-negotiable), except bank notes issued for circulation.
- The rule includes renewal of any such note. Section 180
- Only one documentary stamp tax is imposed on either the loan agreement or promissory notes securing the loan—whichever yields the higher tax. Section 180
- Installment-purchase exemption is reproduced here: loan agreements or promissory notes with aggregate not exceeding P250,000 executed by an individual for personal/family installment purchase of house/lot/motor vehicle/appliance/furniture (not for business/resale/barter/hire) are exempt. Section 180
Insurance upon property (sea/inland waters, fire, lightning): Documentary stamp tax of P0.50 on each four pesos (or fractional part) of the amount of premium charged. Section 184
- No tax is collected on reinsurance contracts or on any instrument effecting/recording cession or acceptance of insurance risks under a reinsurance agreement. Section 184
Fidelity bonds and certain insurance (except life, marine, inland, and fire): Documentary stamp tax of Fifty centavos on each four pesos (or fractional part) of the premium charged. Section 185
Policies of annuities and pre-need plans:
- For annuities: tax of P1.50 on each two hundred pesos (or fractional part) of the capital of the annuity; if unknown, tax is based on each two hundred pesos (or fractional part) of thirty-three and one-third times the annual income. Section 186
- For pre-need plans: tax of P0.50 on each P500.00 (or fractional part) of the value or amount of the plan. Section 186
Indemnity bonds (other than those required in legal proceedings or otherwise provided for): Documentary stamp tax of P0.10 on each four pesos (or fractional part) of premium charged; the tax increases to P0.30 on each four pesos (or fractional part) beginning 1996. Section 187
Certificates: Documentary stamp tax of P10.00 on each certificate of damage and other specified certificates (customs officer/marine surveyor/notary public/and other certificates or documents required by law or rules/regulations or issued to give information or establish proof of a fact). Section 188
- The tax increases to P15.00 beginning 1996. Section 188
Warehouse receipts: Documentary stamp tax of P10.00 per warehouse receipt for property held in storage in a warehouse for another person than the proprietor.
- No tax is collected for warehouse receipts issued to any one person in any one calendar month covering property value not exceeding P200. Section 189
- The tax increases to P15.00 beginning 1996. Section 189
Jai-alai/house race tickets/lotto/authorized number games: Documentary stamp tax of P0.10 per ticket/game; if the cost exceeds P1.00, an additional tax of P0.10 on every P1.00 or fractional part. Section 190
Bills of lading or receipts (except charter party):
- Tax is P1.00 if the value of goods exceeds P100 but does not exceed P1,000.
- Tax is P10.00 if the value exceeds P1,000. Section 191
- Freight tickets covering goods carried as accompanied baggage of passengers on land and water carriers primarily engaged in transporting passengers are exempt. Section 191
Proxies: Documentary stamp tax of P10.00 per proxy for voting at elections for officers or for any other purpose, except proxies affecting the affairs of associations/corporations organized for religious, charitable, or literary purposes. Section 192
- The tax increases to P15.00 beginning 1996. Section 192
Powers of attorney: Documentary stamp tax of P5.00 per power of attorney to perform any act whatsoever, except powers connected with collection of claims due from or accruing to the Government of the Philippines or the government of any province, city, or municipality. Section 193
Leases and other hiring agreements: Documentary stamp tax of P3.00 for the first P2,000.00 (or fractional part), plus an additional P1.00 for every P1,000.00 (or fractional part) in excess of P2,000.00 for each year of the term of the contract. Section 194
Mortgages, pledges, and deeds of trust (security for definite sum): Tax is based on amount secured:
- If the amount secured does not exceed P5,000: P20.00. Section 195(a)
- For each P5,000 (or fractional part) in excess of P5,000: an additional P10.00. Section 195(b)
Fluctuating accounts/future advances without fixed limit: Tax on mortgages/pledges/deeds of trust is computed on the amount actually loaned at execution.
- Additional documentary stamp tax applies on subsequent advances computed at the same rates.
- If the full amount of the loan/credit granted is specified in the mortgage/pledge/deed of trust, tax is computed and paid on the full amount specified. Section 195
Deeds of sale and conveyance of real property:
- Tax applies to conveyances/deeds/instruments/writings (other than grants, patents, or original certificates of adjudication issued by the Government) for transfer of lands/tenements/realty to purchasers or persons designated by purchasers.
- If consideration/value after proper allowance for encumbrances does not exceed P1,000: P15.00. Section 196(a)
- For each additional P1,000 (or fractional part) in excess of P1,000: additional P15.00. Section 196(b)
- If tax payable is reduced by incorrect statement of consideration, the Commissioner, provincial or city treasurer, or other revenue officer may assess true market value from assessment rolls or other reliable sources and collect the proper tax. Section 196
Charter parties and similar instruments:
- For ship/vessel/steamer charter arrangements and renewals/transfers: tax rates depend on registered gross tonnage and duration.
- Not exceeding 1,000 tons and duration not exceeding 6 months: P500.00 plus additional P50.00 per month or fraction beyond 6 months. Section 197(a)
- Exceeding 1,000 tons but not exceeding 10,000 tons and duration not exceeding 6 months: P1,000 plus additional P100.00 per month or fraction beyond 6 months. Section 197(b)
- Exceeding 10,000 tons and duration not exceeding 6 months: P1,500 plus additional P150.00 per month or fraction beyond 6 months. Section 197(c)
Documentary stamp tax on policies and instruments under Title VII rate provisions: Documentary stamp tax applies under the named Title VII sections and rates are rationalized under the regulation consistent with the amended NIRC provisions and Republic Act No. 7660. Section 11

Penalties and administrative consequences

Late payment: Late payment of the documentary stamp tax due triggers a surcharge equal to twenty-five percent (25%) of the basic tax due. Section 12(a)
Further non-payment after notice and demand: If basic tax and the 25% surcharge are not paid within the time prescribed in the notice and demand, a further interest of twenty percent (20%) per annum is assessed and collected, computed on the basis of the basic tax and surcharge. Section 12(a)
Other violations: Any other violation of the regulations is punishable under Title X, Chapter II of the Tax Code, as amended. Section 12(b)

Compliance administration and cancellation method

Tax payment for stamp amounts under P10.00 is completed by affixing and canceling documentary stamps on the taxed document/instrument using the cancellation method required by the regulations. Section 4
Tax payment for amounts P10.00 or more is completed by recording the evidence-of-payment details (official receipt number, payment date, amount, and payor name) on the document instead of affixing actual stamps. Section 4

Repeal and effect of inconsistent rules

Inconsistent existing rules and regulations—or parts of them—are revoked or modified. Section 13