BIR Ruling [DA-476-98]

November 4, 1998 BIR RULING [DA-476-98] Fujitsu Computer Products Corporation of the Philippines Special Export Processing Zone Carmelray Industrial Port Canlubang, Calamba, Laguna Attention: Mr . Masaaki Nagamine President Gentlemen : This refers to your letter dated January 9, 1997 requesting for the waiver of surcharge amounting to P2,692,000.00 which the Revenue District Officer of Revenue District Office No. 56 is seeking to impose against you as deficiency documentary stamp tax. It is represented that the outstanding capital stock of your firm is 100% owned by Fujitsu Limited of Japan; that you are duly registered with the Securities and Exchange Commission (SEC) on February 1, 1995 under Registration No. AS095-000940; that you are likewise registered with the Philippine Economic Zone Authority on March 23, 1995 as an export enterprise under Certificate of Registration No. 95-35; that the primary purpose for which you were organized and registered is to engage principally in the research, design, development, production, manufacture, processing, assembly, preparation, fabrication, promotion, importation and exportation of finished and/or semi-finished computers, computer components, as well as parts and accessories thereof; that items produced by your firm are good for exportation to foreign countries, mainly to the United States and Japan; and that the reasons for your request are as follows: 1. At the time you applied for the registration of your firm with Revenue District Office No. 56, you were not informed and neither were you required to pay the documentary stamp tax on your fully paid shares. In fact, you paid the amount of P425,000.00, which is 50% of the documentary stamp tax you paid based on your initial fully paid shares of P85 Million, merely in compliance with the request of the Revenue District Officer to augment the tax collections of the district office. At that time, what you knew was that documentary stamp tax is supposed to be paid only upon issuance of certificates of stock. Had you been required to fully pay for the documentary stamp tax as a condition for the registration of your firm, in accordance with existing laws, rules and regulations, you would have done so; 2. With respect to the deficiency documentary stamp tax of P10,770,000.00 you were not dutifully informed by Revenue District Office No. 56 as to when you are supposed to pay documentary stamp tax on your fully paid shares whenever you increase your authorized capital stock. The authorized capital stock of your firm has been increased ten (10) times from February 1995 to August 1996, during which times the increase was always fully paid up. Up to the present, you have not come across complete guidelines and/or regulations as to when the documentary stamp tax should be paid in such cases; 3. You are willing to pay in full at any time the deficiency documentary stamp tax P10,770,000.00, notwithstanding the fact that you have not issued any certificate of stock inasmuch as based on the opinion of this office you recently obtained, once shares are fully paid, they are deemed as issued shares. The registration of your firm in accordance with Philippine laws signified your conformity to be bound by and comply with its laws. At no time have you entertained the idea of violating any of Philippine laws, rules and regulations. In reply, please be informed that the delivery of the certificates of stock, whether actual or constructive, to the stockholders is not essential for the documentary stamp tax to be imposed. What is taxed is the privilege of issuing shares of stocks and therefore, the tax accrues at the time the shares are issued . (Sec. 5, Revenue Regulations No. 9-94) Accordingly, when a corporation issues a certificate of stock (representing the ownership of stocks in the corporation to fully paid subscription) the certificate of stock can be utilized to exercise the attributes of ownership over the stocks mentioned on its face. The certificate as issued by the corporation, irrespective of whether or not it is in the actual or constructive possession of the stockholder, is considered issued because it is with value and therefore the documentary stamp tax must be paid on original issue of certificate of stocks. (Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc. and the CTA, 145 SCRA 671-679, G.R. L-68230, Nov. 25, 1986) The documentary stamp tax on original issues of shares of stock shall attach upon acceptance by the corporation of the stockholder's subscription regardless of the actual delivery of the certificates of stock pursuant to Section 175 of the Tax Code of 1997. Under Sections 248 and 249, both of the Tax Code, as amended, the imposition of the surcharge and interest on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The laws imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasions or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and the maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the state on time. (Jamora vs. Meer, 74 Phil. 22) In view thereof, your aforementioned request can not be granted for lack of legal basis. You are requested to pay your deficiency documentary stamp tax and surcharge plus 20% interest up to the date of payment, otherwise, this Office will be constrained to enforce collection thereof through the summary remedies prescribed by law. aisadc Very truly yours, Commissioner of Internal Revenue By: (SGD) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)