BIR Ruling [DA-332-05]

July 28, 2005 BIR RULING [DA-332-05] R.A. No. 9243; DA-138-97 United Coconut Planters Life Assurance Corporation 6774 Cocolife Building, Ayala Avenue, Makati City Attention: Ms. Virginia D. Cunanan AVP, Accounting Department Gentlemen : This refers to your letter dated November 2, 2004 requesting for a clarification on the implementation of Republic Act No. 9243 on the following type of loans: 1. Policy Loan a loan taken from the cash surrender value of a life insurance policy and normally for personal use of the policy holder/borrower; 2. Salary Loan a loan taken from the insurance coverage of an insurance policy and normally for personal use of the policy holder/borrower; 3. Financial Assistance Loan loan granted to the employee of the company for medical, educational and other personal use of the employee or his family; and that said loans amount to less than P250,000.00. In reply, please be informed that Section 9(d) of Republic Act No. 9243, dated March 20, 2004 provides: "SEC. 9. Section 199 of the National Internal Revenue Code of 1997, as amended, is hereby further amended as follows: SEC. 199, Documents and Papers Not Subject to Stamp Tax. The provisions of Section 173 to the contrary notwithstanding, the following instruments, documents and papers shall be exempt from the documentary stamp tax: xxx xxx xxx (d) Loan agreements and promissory notes, the aggregate of which (does not exceed Two hundred fifty thousand pesos (P250,000), or any such amount as may be determined by the Secretary of Finance, executed by any individual for his purchase on installment for his personal use or that of his family and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture; Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance with the relevant price index by not to exceed ten percent (10%) of the current amount and shall remain in force at least for three (3) years." Accordingly, pursuant to Republic Act No. 9243 dated March 20, 2004 for loan agreements to be exempted from the documentary stamp tax, the aggregate amount should not exceed two hundred fifty thousand pesos (P250,000.00) or any such amount as may be determined by the Secretary of Finance, executed by any individual for his purchase on installment for his personal use or that of his family and not for business or resale or hire of a house, lot, motor vehicle, appliance or furniture. DACaTI Therefore, this Office is of the opinion that the following loans you grant to your policyholders and employees; namely, policy loan, salary loan, financial assistance loan are considered loan agreements, the aggregate of which does not exceed P250,000.00, is exempt from the payment of the documentary stamp tax pursuant to Section 9(d) of Republic Act No. 9243. Should said loans exceed the threshold amount of P250,000.00, the same shall be subject to the documentary stamp tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. SaHTCE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service