BIR Ruling [DA-459-03]

December 5, 2003 BIR RULING [DA-459-03] 175; 077-98 Clark International Airport Corporation Executive Office Building Clark Special Economic Zone Clarkfield, Pampanga Attention: Mr. Franco V. Puzon President & CEO Gentlemen : This refers to your letter dated 27 June 2000 concerning your request for a confirmation that, since the CLARK INTERNATIONAL AIRPORT CORPORATION (CIAC) is duly registered under Republic Act No. (R.A.) 7227 otherwise known as the Bases Conversion and Development Act of 1992, hence, subject only to the 5% special tax, in lieu of all kinds of taxes, fees or assessments of any kind, nature or description, its original issue of shares of stock is likewise exempt from the documentary stamp tax prescribed under Section 175 of the National Internal Revenue Code, as amended by R.A. 8424. It is represented that CIAC is a subsidiary of the Clark Development Corporation, a government-owned and controlled corporation established pursuant to Executive Order (E.O.) No. 192, series of 1994, as amended by E.O. No. 360, series of 1996, to operate and manage the Clark aviation complex, within the Clark Special Economic Zone; that it is duly registered under R.A. 7227, in relation to Section 3 of Presidential Proclamation No. 420, series of 1994, Section 5 of E.O. No. 80 and Section 2, Paragraph 2.1.2 of E.O. No. 62; that as such, in lieu of paying local and national taxes, CIAC shall only be liable for tax at the rate of 5% of gross income earned; and that the issue of whether or not CIAC's original issuance of shares of stock shall be subject to the documentary stamp tax prescribed under Section 175 of the National Internal Revenue Code, as amended by R.A. 8424, has been raised to the Office of the Government Corporate Counsel. In Opinion No. 039, series of 1999, dated 24 February 1999, the Government Corporate Counsel opined that " As expressed in the aforecited provisions, the consideration for the grant of the tax exemption package is the payment of the five percent (5%) gross income tax therein, in lieu of all kinds of taxes, levies, fees or assessment of any kind, nature or description. The documentary stamp tax to be imposed on CIAC subscribed capital stock is an internal revenue tax (Sec. 175, NIRC), imposed by the National Government, hence included among the tax exemptions . Records of this case also disclosed that, in a letter dated 7 June 2000, the Regional Director, Revenue Region No. 4, BIR, San Fernando, Pampanga, advised CIAC that its original issuance of shares of stock, represented by its subscribed capital stock on the increase of its capitalization by P500 Million, is subject to documentary stamp tax under Sec. 175 of the Code, hence, its request for payment of deficiency documentary stamp tax, inclusive of increments, in the amount of P6,691,666.67. EaCSTc In reply, please be informed that: "The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance." (Sec. 4, NIRC of 1997) Moreover, for purposes of the documentary stamp taxes, Sec. 173 of the said Code provides " . . . That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. " Accordingly, this Office is of the opinion and hereby holds that while the CIAC is exempt from the payment of said documentary stamp tax pursuant to the provisions of R.A. No. 7227, however, its stockholders shall be the ones liable to the payment of documentary stamp tax pursuant to Section 173, in relation to Section 175 of the Code, as stated in BIR Ruling No. 124-98 dated 31 August 1998, as follows: " . . . Section 173 of the same Code provides that, whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto, who is not exempt shall be the one directly liable for the tax. Accordingly, since rural banks are exempt from the documentary stamp tax, the stockholders are the ones liable for the payment of the documentary stamp tax due on said certificates of stock to be issued by the former ." Furthermore, 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group