BIR Ruling

May 29, 1967 Mr. Julian D. Mercado Executive Assistant to the Deputy Governor Central Bank of the Philippines Manila S i r : This refers to your 1st Indorsement dated August 30, 1966, requesting the opinion of this Office as to the propriety and legality of the present practice of the Central Bank in collecting the cost of documentary stamps from commercial banks and other entities on its sales of foreign exchange. LLpr In reply, I have the honor to inform you as follows: Pursuant to Section 210 of the Tax Code, the documentary stamp tax is payable by the person making, signing, issuing, accepting, or transferring the obligation, right or property incidental thereto at the time the act is done or transaction had. From the law, it will appear that the stamp tax may be payable by either party to the transaction. In the sale of foreign exchange by the Bank, the transaction is initiated by the party buying and, upon acceptance by the Central Bank, the Central Bank advises its depositaries abroad to transfer to the correspondent bank of the buyer the foreign exchange purchased for the account of the latter. In this instance, the taxable instrument consists of the advisement rendered in whatever form by the Bank to its depositaries abroad which is equivalent to an order for the payment of money. As the tax is payable either by the Bank or the purchaser of the foreign exchange, the purchaser is considered to be the payor thereof, the Bank being exempt from tax. In the light of the foregoing, the Bank is requested to pay to the Cashier of the Bureau of Internal Revenue its collections by way of documentary stamp tax on its sales of foreign exchange. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue