BIR Ruling [DA-060-01]

April 4, 2001 BIR RULING [DA-060-01] Ever Sun Development Ltd . 2/F Kings Court Bldg. I, 2129 Chino Roces Ave. Makati City Attention: Wilson Co Chan Hong V.P.-Marketing Gentlemen : This refers to your letter dated March 21, 2001 requesting for a confirmatory opinion that the documentary stamp taxes (DST for brevity) you paid in the amount of P634,380.00 for a mortgage executed to secure a loan in the aggregate amount of P316\7,180,320.00 is the correct amount of DST under Section 195 of the 1997 Tax Code. You represent that your company is a foreign corporation engaged in manufacturing of wood products. You are registered with Revenue District No. 48, West Makati of Makati Region No. 8 under TIN 048-000-117-743. On February 1, 2001, you secured a loan with HSBC/Equitable-PCI Bank in the amount of US$6,452,000.00 with a peso equivalent of P317,180,320.00 (converted at P49.16/$1.00). As part of the loan agreement, you were required to pay the DST on the said transaction. On March 9, 2001, the DST was paid with UCPB-Pasong Tamo Branch using BIR Form No. 2000. In reply, please be informed that Section 8 of Revenue Regulations No. 9-94 states that: "SEC. 8. Loan Agreements/Promissory Notes Secured by a Pledged/Mortgage . Where only one instrument was prepared, made, signed and executed to cover a loan agreement/promissory note, pledge/mortgage, the documentary stamp tax prescribed in Section 195 of the Tax Code, as amended, shall be paid and computed on the full amount of the loan or credit granted. In this regard, the instrument shall be treated as covering only one taxable transaction, subject to the higher documentary stamp tax . " (Emphasis supplied.) Section 180 of the 1997 Tax Code specifically provides that: "SEC. 180. Stamp Tax on All Bonds, Loan Agreements, Promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or Any of its Instrumentalities, Deposit Substitute Debt Instruments, Certificates of Deposits Bearing Interest and Others Not Payable on Sight or Demand . On all bonds, loan agreements, including those signed abroad, wherein the object of the contract is located or used in the Philippines, bills of exchange (between points within the Philippines), drafts, instruments and securities issued by the Government or any of its instrumentalities, deposit substitute debt instruments, certificates of deposits drawing interest, orders for the payment of any sum of money otherwise than at sight or on demand, on all promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of Thirty centavos (P0 . 30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan, whichever will yield a higher tax: Provided, however, That loan agreements or promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000) executed by an individual for his purchase on installment for his personal use or that of his family and not for business, resale, barter or hire of a house, lot, motor vehicle, appliance or furniture shall be exempt from the payment of the documentary stamp tax provided under this Section." (Emphasis supplied.) Therefore, the documentary stamp tax due is P475,770.48 (P317,180,320.00 x 0015) On the other hand, Section 195 of the 1997 Tax Code states that: "SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust . On every mortgage or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due and owing or forborne to be paid, being payable, and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise, there shall be collected a documentary stamp tax at the following rates: (a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00). (b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00). aAEIHC xxx xxx xxx" Accordingly, the amount of the DST under the aforecited section is computed as follows: AMOUNT DST DUE P 5,000.00 P 20.00 317,175,000.00 634,350.00 320.00 10.00 P317,180,120.00 P634,380.00 ============ ========= Applying the aforecited Revenue Regulation and comparing the computations of the documentary stamp tax due, this Office hereby confirms your opinion that the DST due on the mortgage executed to secure a loan in the aggregate amount of P317,180,320.00 is P634,380.00 under Section 195 of the 1997 Tax Code, the same yielding the higher tax than Section 180 ( supra ). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group