Request for Exemption from Payment of Documentary Stamp Tax for the Opening of the L/C in Order to Minimize the Project Cost and Payment of Interest

February 14, 1995 BIR RULING NO. 033-95 173 000-00 033-95 Department of Transportation & Communications Philcomcen Bldg., Ortigas Avenue Pasig, Metro Manila Attention: Mr . Mario C . Miranda Project Manager EDSA LRT System Project Gentlemen : This refers to your letter dated August 26, 1993, stating that that Office has entered into a build, lease and transfer (BLT) agreement with the EDSA LRT Corporation, Ltd. for the construction, maintenance and transfer of an LRT along EDSA; that the agreement embodies the provision of a Letter of Credit (L/C) as a payment mechanism for the contractor's undertaking; and that all cost of the Project, including the payment of the documentary stamp tax on L/C and other charges will be advanced by the contractor but will ultimately be charged against you. On the basis of the foregoing, you are requesting this Office to grant you exemption from the payment of the documentary stamp tax for the opening of the L/C in order to minimize the project cost and payment of interest. In reply, please be informed that your aforesaid request cannot be granted by this Office as only Congress has the power to grant exemptions from taxation. Besides, even if you can secure exemption from the payment of the documentary stamp tax, EDSA LRT Corporation, Ltd. will be the one directly liable to pay the documentary stamp tax on the Letter of Credit in question since it does not enjoy exemption from taxes. It will be noted that under Section 173 of the Tax Code, as amended, the documentary stamp tax is payable by the person making, signing, issuing, accepting or transferring the document, instrument and paper. However, where one party to the transaction enjoys exemption from the documentary stamp tax, the other party who is not exempt shall be the one directly liable therefor. cdt Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue