BIR Ruling [DA-126-02]

July 25, 2002 BIR RULING [DA-126-02] RA 7916 & 7279; DA-86-2001 Harbour Centre Port Terminal, Inc. 105B, Mercantile Insurance Building corner Gen. Luna & Beaterio Streets Intramuros, Manila Attention: Vicente T. Suazo, Jr. President Gentlemen : This refers to your letter dated December 11, 2001 requesting for confirmation of your opinion that the original issuance of common and preferred shares of stock by Harbour Centre Port Terminal, Inc. arising from the increase in its capitalization to the National Housing Authority (NHA) through its trustee bank, Planters Development Bank, is exempt from documentary stamp tax prescribed in Section 175 of the 1997 Tax Code. It is represented that Harbour Centre Port Terminal, Inc. (Harbour Centre) is a corporation organized and existing under the laws of the Philippines; that it is engaged in the business of operating and maintaining a harbour port terminal facility, a private port terminal located at the Manila Harbour Centre Special Economic Zone; that it started its commercial operation on January 1, 1998 and was registered with the Philippine Economic Zone Authority (PEZA) under PEZA Certificate of Registration No. 99-04-F dated June 18, 1999 as an ECOZONE Facilities Enterprise at the Manila Harbour Centre Special Economic Zone; that in a PEZA Certification dated January 19, 2001, Harbour Centre is entitled to the 5% preferential tax rate in lieu of national and local taxes; that its original authorized capital stock was One Hundred Five Million Pesos (P105,000,000.00) divided into One Hundred Five Thousand (105,000) common shares with a par value of One Thousand Pesos (P1,000.00) each; that the authorized capital stock was subsequently increased to Four Hundred Five Million Pesos (P405,000,000.00) divided into four hundred five thousand (405,000) common shares with a par value of One Thousand Pesos (P1,000.00) each; that during the stockholders meeting on January 11, 2001, the Board of Directors and the stockholders, owning or representing at least two-thirds of the outstanding capital stock, approved to increase its authorized capital stock to Two Billion One Hundred Fifty Five Million Pesos (P2,155,000,000.00) divided into one billion twelve million (1,012,000,000) common shares with a par value of One Peso (P1.00) each and one billion one hundred forty three million (1,143,000,000) preferred shares with a par value of One Peso (P1.00) each; that its applications to increase the authorized capital stock and to amend the articles of incorporation were duly approved by the Securities and Exchange Commission (SEC) on November 27, 2001; that NHA through its trustee bank fully subscribed to Harbour Centre's common and preferred shares arising from the increase in the latter's capitalization; and that NHA being a primary government agency in charge of providing housing for the underprivileged and homeless, is exempt from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes , as well as documentary stamp tax on all documents or contracts executed by or in its favor. In reply, please be informed that pursuant to Section 19 of Republic Act No. 7279 (R.A. 7279), amending Presidential Decree No. 757 (P.D. 757), pertinent portion of which reads as follows: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national such as income or realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of the documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. (emphasis supplied) all documents or contracts executed by and in favor of NHA is exempt from the payment of documentary stamp tax. It is also noteworthy to mention that the foregoing tax exemption privileges of NHA has been resolved in BIR Ruling No. 071-98 dated May 25, 1998. On the other hand, pursuant to Section 24 of republic Act No. 7916 (R.A. 7916), otherwise known as "The Special Economic Zone Act of 1995", as amended by Republic Act No. 8748 (R.A. 8748), PEZA-registered enterprises, except persons and service enterprises referred to under Section 25 of said Act, shall, in lieu of paying national and local taxes, except real property taxes on land owned by developers, pay five per cent (5%) of their gross income earned which shall be paid and remitted as follows: a) Three percent (3%) to the National Government; b) Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's office of the municipality or city where the enterprise is located. STaHIC Pursuant to the foregoing provision, Harbour Centre, as a PEZA-registered enterprise, is entitled to the five percent (5%) preferential tax rate, in lieu of paying the national and local taxes. Such being the case, the issuance of shares of stock by Harbour Centre in favor of NHA through its trustee, Planters Development Bank, is also exempt from documentary stamp tax imposed in Section 175 of the 1997 Tax Code. Moreover, considering that both parties to the transaction are exempt from the payment of documentary stamp tax, the proviso of Section 173 of the same Tax Code shifting the burden of paying the documentary stamp tax on the taxable document to the party who is not exempt, shall not apply. ( BIR Ruling No. DA-086-2001 dated May 16, 2001 ) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group