Exemption of ADB from Documentary Stamp Tax for Issued Checks

February 27, 1985 BIR RULING NO. 028-85 222 000-00 028-85 Gentlemen : This refers to your letter dated October 15, 1984 stating that the Asian Development Bank (ADB) is currently in the process of introducing a computerized system for the payment of its administrative expenses, which will require ADB to use checks especially designed to be compatible with the operation of such system; that ADB has recently placed an order for the printing of these specially designed checks with NCR Corporation of the Philippines (NCR); that NCR has informed ADB that it is a customary practice for the documentary stamp tax to be collected from NCR at the time of printing of checks since NCR is considered to be the party issuing the checks; that normally, NCR would pass on to ADB this additional expense incurred in the printing of checks by including the tax element in all bills presented to ADB but that, by reason of ADB's tax-exempt status, NCR has requested for a certification of tax exemption in favor of ADB so that the latter will not be billed for said documentary stamp. Based on the foregoing representations, you now request a ruling as to whether ADB is exempt from the payment of local taxes, including indirect taxes such as documentary stamp tax which is imposed on the printing of checks by NCR. In reply, please be informed that under Article 56 of the Charter of ADB and Section 34 of the Agreement between ADB and the Government of the Republic of the Philippines regarding the headquarters of ADB which read: Article 56 "The Bank, its assets, property, income and its operations and transactions, shall be exempt from all taxation and all customs duties. The Bank shall also be exempted from any obligation for the payment, withholding or collection of any tax or duty." Section 34 "The Bank, its property and its operations and transactions shall be exempt from: (a) all taxation and any obligation for the payment, withholding or collection of any tax or duty. The Bank will not claim exemption from taxes or charges which are no more than payments for public utility services; (b) all customs duties and other levies on any goods, articles, including motor vehicles spare parts and publications imported or exported by the Bank for its official use, and any obligation for the payment, withholding or collection of any customs duties. The goods and articles, including vehicles, spare parts and publications imported under such exemption will not be sold in the Republic of the Philippines except under conditions agreed upon with the government; and (c) all prohibitions and restrictions on imports and exports in respect of goods or articles, including motor vehicles, spare parts and publications intended for the official use of the Bank. ADB shall be exempt from internal revenue taxes for which it is directly liable . Pursuant to Section 222 of the Tax Code as amended, the documentary stamp tax shall be imposed upon documents, instruments and papers, and upon acceptances, assignment sales, and transfers of the obligation, right, or property incident thereto and shall be paid by the person making, signing, issuing, accepting, or transferring the same, at the time such act is done or transaction had . In the instant case, as the issuer of the checks, ADB is directly liable for the tax; however, since both the Charter and the Agreement provide that ADB, its assets, property, income, and its operations and transactions shall be exempt from all taxation, which is interpreted by this Office to mean exemption only from its direct liability for internal revenue taxes, ADB is, therefore, exempt from paying documentary stamp tax on the aforementioned checks issued by it. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner