BIR Ruling

1977 The Acting Commissioner of the Budget Malacaang, Manila Attention: Mrs . Lourdes C . Evangelista Officer-In-Charge Financial & Administrative Service S i r : This refers to the letters of that Office, requesting that the Deed of Absolute Sale entered into on October 13, 1977 by and between the San Miguel Corporation, as Vendor and the Republic of the Philippines, thru that Office, as Vendee, be exempted from the documentary and science stamp taxes, on the ground that the said Vendee assumed liability for said taxes pursuant to paragraph 5 of the said Deed of Absolute Sale which read thus "5. EXPENSES OF REGISTRATION . Any and all fees and expenses incident to the registration and transfer of the title of the properties sold herein to the VENDEE shall be borne and defrayed by the VENDEE. The VENDOR hereby agrees to execute any and all deeds or documents that may be necessary and required for the purpose of transferring ownership of the properties to the VENDEE." In the letter of that Office dated November 17, 1977, you explained that the "expenses" referred to in the abovequoted paragraph of the aforementioned Deed of Absolute Sale include documentary and science stamp taxes. In other words, the Vendee, the Republic of the Philippines, assumed liability for the taxes due on the document in question. In reply, I have the honor to inform you that pursuant to Section. 222 (formerly Section 210) of the Tax Code, the documentary stamp taxes (including science stamp taxes) due on documents shall be paid by the person making, signing, issuing, accepting or transferring the same, which provision of law was interpreted by the Court of Tax Appeals as placing the burden of paying the tax upon the parties to the contract and leaves the tax to be paid indifferently by either party, and accordingly, the party assuming payment of said taxes becomes directly liable therefor. (Sta. Clara Lumber Co., Inc. versus Jose Araas, C.T.A. Case No. 502, June 12, 1959). As the Vendee, the Republic of the Philippines, has become directly liable for the tax, and since the Government and its instrumentalities is exempt from tax, its exemption resting on the State's sovereign immunity from taxation. (Gomez v. Palomar, 25 Supreme Court Reports Annotated 827), the Deed of Absolute Sale hereinabove mentioned is exempt from the documentary and science stamp taxes. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8