BIR Ruling [DA-053-97]

February 2, 1997 BIR RULING [DA-053-97] National Steel Corporation P.O. Box 631, MCC Makati City Attention: Mr . Roger Chan Senior Manager Manila Administration Gentlemen : This refers to your letter dated July 1, 1996 stating that on September 29, 1983, a Contract of Sale was entered into between the National Development Company (NDC) and National Steel Corporation (NSC) for the purchase of certain real and movable properties for a total consideration of P159,446,070.00; that based on the stipulation of the parties, all taxes in connection with the contract of sale were assumed by NSC as buyer; and that on November 23, 1982, NSC was registered with the Board of Investments under Certificate of Registration No. 82-446 as a preferred pioneer enterprise for the production and manufacture of integrated steel products, entitled to avail of the exemption from all national internal revenue taxes, except income tax, under Art. 46(a) of P.D. 1789 otherwise known as the Omnibus Investments Code, to the following extent: cdta 100% for five (5) years from March 1982 to March 18, 1987; 75% for the sixth (6th) to the eight (8th) years 50% for the 9th to the 10th years 20% for the 11th to the 12th years 10% for the 13th to the 15th years; that the foregoing exemption shall cover all direct taxes including taxes on documents; instruments and papers issued in connection with its registered operations, and shall exclude such taxes as may be transferred or passed on to it either by business practice or by mere contractual arrangement. Based on the foregoing, you are in effect requesting exemption from payment of documentary stamp tax for the aforesaid Contract of Sale. In reply, please be informed that pursuant to then Section 222 (later amended and renumbered as Section 186 by P.D. 1994) of the Tax Code of 1977, the documentary 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 parties, and accordingly, the party assuming payment of said taxes becomes indirectly liable therefore. (Sta. Clara Lumber Co., Inc. vs. Jose Aranas, C.T.A. Case No., June 12, 1959) Accordingly, since under the terms of the Contract Sale you assumed payment of the documentary stamp tax and thereby became directly liable for the tax, the said document is exempt from the documentary stamp tax in view of your aforesaid exemption under the Omnibus Investments Code (P.D. No. 1789). The provision of P.D. 1994 amending said Section 186 (now Section 173) of the Tax Code to the effect that "whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax" will not apply in the instant case because the transaction took place prior to January 1, 1986 which is the effective date of said decree. This serves as your authority to secure a Certificate of Registration from the Revenue District Officer concerned authorizing registration of the aforesaid properties covered by the Contract of Sale executed by and between the National Development Company, as seller and National Steel Corporation, as buyer, without payment of the documentary stamp tax imposed under Section 196 of the Tax Code, as amended by Republic Act No. 7660. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue