BIR Ruling

May 30, 1977 The Executive Director Energy Development Board Philippine National Petroleum Center Merrit Road, Fort Bonifacio, Rizal S i r : This refers to your letter dated January 18, 1977 requesting opinion on behalf of the Reed Bank, a service contractor, on whether it is subject to the payment of documentary and science stamp taxes on insurance policies procured or received by it as such contractor, pursuant to Paragraph (a), Section 12 of Presidential Decree No. 87, known as the "Oil Exploration Act", which provides viz: "Sections 12. Privileges of Contractor . The provisions of any law to the contrary notwithstanding, a contract executed under this act may provide that the contractor shall have the following privileges. a) Exemption from all taxes except income tax." It appears that the service contractor, as required by good and sound petroleum exploration practices, procures certain insurance policies covering Cost of Control, Third Party Liability and Miscellaneous Equipment; that under the service contract entered into by the service contractor, the exempting provision of the aforesaid decree is also expressly embodied. In reply, I have the honor to inform you that the law applicable in this case is Section 210, which reads as follows: "SEC. 210. Stamp taxes upon documents, instruments, and papers . Upon documents, instruments, and papers, and upon acceptances, assignments, sales, and transfers of the obligation, right, or property incident thereto, there shall be levied, collected and paid, for and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the same, and at the time such act is done or transaction had." It will be noted from the abovequoted provision of the applicable law that the documentary stamp tax (and the corresponding science stamp tax) are payable by either the person making , signing , issuing , accepting , or transferring the document, instrument and paper. Said provision leaves the tax to be paid indifferently by either party (Sta. Clara Lumber Company, Inc. vs. Jose Araas, C.T.A. Case No. 502, June 12, 1959). Thus where one party to the contract is exempt from said taxes, the other party, who is not tax-exempt, shall be liable therefor. As the insurance company, the other party to the contract and the one issuing said taxes, then it is the one liable therefor, pursuant to Section 210 of the Tax Code. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8