Documentary Stamp Tax on the Certificates of Stocks

February 22, 1989 BIR RULING NO. 031-89 175-00 066-87 031-89 Gentlemen : This refers to your letter dated September 19, 1988 requesting a ruling as to whether or not you are liable for documentary stamp tax on the certificates of stocks that you will issue to the National Government. cdtech It appears that from 1981 to 1983, you and your subsidiaries- PNOC-EDC, PNOC-EC and PNOC-Coal have incurred expenses amounting to P960,900.00 for exploration and development programs designed to make possible the full utilization of the Philippine's geothermal, coal, uranium and oil reserves; that pursuant to the Letter of Instruction No. 1226 dated April 12, 1982 and Letter of Instruction No. 1353 dated September 19, 1983, the Government reimbursed you for said expenses; that in view of PNOC Board Resolution No. 334, s. 1983, PNOC authorized the issuance of shares of stocks to the National Government to the extent of P960,000.00; that PNOC is to issue shares of stocks at a par value of P500 in favor of the National Government; that PNOC-EDC and PNOC-Coal are to issue shares of stocks in favor of PNOC corresponding to its respective amount of capital allocation; and that PNOC-EC is to issue shares of stocks at P0.01 par value in favor of PNOC equivalent to the additional capital infusion by PNOC. In reply, please be informed that based on the foregoing facts, you and your subsidiaries are liable for documentary stamp tax on your original issues of certificates of stocks to the Government pursuant to Section 175 of the Tax Code. The reason is that, documentary stamp tax is a tax on transaction and the taxable transaction is the act of originally issuing the certificates of stocks. The fact that the consideration for said shares of stocks is in the form of reimbursement for actual expenses, or that the consideration is diminished because of the documentary stamp tax does not affect the fact that the taxable act of originally issuing the certificates of stock has taken place. Very truly yours, (SGD.) JOSE U. ONG Commissioner