Exemption of Ship Mortgage from the Documentary Stamp Tax

January 20, 1989 BIR RULING NO. 005-89 195 068-83 005-89 Gentlemen : This refers to your letter dated August 23, 1988 requesting in behalf of your client, Manufacturers Hanover Trust Company (Hong Kong Branch) (Mantrust), for a ruling exempting from the documentary stamp tax the ship mortgage executed abroad by Yarrow Maritime Corporation S.A. (Yarrow) in favor of your client. cdt It is represented that Yarrow is a non-resident foreign corporations not doing business in the Philippines and organized and existing under the laws of the Republic of Panama while Mantrust is an American banking institution; that to secure a loan, Yarrow executed in Hong Kong a first preferred ship mortgage on the vessel MV "Kabite" in favor of Mantrust; and that at present, the vessel is being leased by Yarrow under a bareboat charter to Orientstar Shipping Corporation, a domestic corporation. In reply, please be informed that the aforesaid first Preferred Ship Mortgage being executed abroad is not subject to the documentary stamp tax imposed by Section 195 of the Tax Code. This is in accordance with the ruling previously issued by this Office to the effect that the documentary stamp tax, being an excise tax, is applicable only to transactions effected and consummated within the Philippines. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner