Non-inclusion of Documentary and Science Stamp Taxes in the Tax Exemption

February 13, 1981 BIR RULING NO. 036-81 222-00 137-79 036-81 Messrs. De Vera, Fernandez, Dino & Cualteros Attorneys & Counsellors-at-Law Elena Apartments 512 Romero Salas Street Ermita, Manila Attention: Atty . Jose M . de Vera Gentlemen : This refers to your letter dated June 9, 1978 requesting opinion as to whether or not the tax exemption provided for under Section 6(1) of Act No. 1828 (Nickel Law), as amended by Republic Act Nos. 2077 and 4167, the pertinent portion of which reads: "xxx xxx xxx " Provided, That the operator shall, from the effective date of the contract of operation up to and including the fifth year after commencement of actual production, be exempt from all taxes, duties, fees and charges, both national and local, directly payable by it for any work or activity, equipment, machinery, materials, instruments, supplies, accessories, structures, buildings, lands, improvements, and/or other properties directly connected with or needed and to be used exclusively in the operation, other than those provided in this Act and except those fees and charges, that are imposed for work or services actually rendered to the operator ." (Emphasis Ours) which is now being enjoyed by Marinduque Mining and Industrial Corporation includes documentary and science stamp taxes for insurance coverages on the properties of its Surigao Nickel Project. In the Operating Contract dated July 3, 1968 executed between the Republic of the Philippines and the Marinduque Mining and Industrial Corporation as Operator, it is provided, that "(1) The operator shall furnish at its own cost and expense all materials, labor, equipment, plants and other installations and processes that may be required for carrying on the operations herein authorized or necessary or incident thereto, and all operations, processes, work or acts shall be carried but at the Operators own cost and expenses:" In other words, Marinduque Mining and Industrial Corporation assumed payment of all cost and expenses which includes the documentary stamp taxes in question. cdtech In reply, I have the honor to inform you that pursuant to Section 222 of the Tax Code of 1977, as amended by Presidential Decree No. 1457, the documentary stamp tax due on the documents shall be paid by the person making, signing, issuing, accepting or transferring the same, which provisions of law was interpreted by the Court of Tax Appeals as placing the burden of paying the tax to be paid indifferently by either party, and accordingly, the party assuming payment of said taxes becomes directly liable therefor. (Sta. Clara Lumber Co., Inc. vs. Jose Aranas, CTA Case No. 502, June 12, 1969). This Office however, believes that the tax exemption now being enjoyed by Marinduque Mining and Industrial Corporation does not include documentary and science stamp taxes for insurance coverages in the properties of its Surigao Nickel Project. It is worthy to note in this connection that the tax exemption referred to at "its own cost and expense" pertains to all materials, labor, equipment, plants and other installations and processes that may be required for carrying on its authorized operation; and that insuring its property, i.e., the Surigao Nickel Project is not an activity or work directly connected with or essential in its operation; neither is there any provision in the operating contract requiring Marinduque Mining as the operator to insure its properties at Surigao Nickel Project. The act of insuring is merely an attribute of ownership, the tax consequence of which is not within the coverage of the tax exemption privileges contemplated within the purview of R.A. Nos. 2077 and 4167 which is being enjoyed by the Marinduque Mining Corporation covering a period of five (5) years from commencement of actual production in accordance with the abovequoted provision of Act No. 1828, as amended. Moreover, as regards your request for exemption from the 2% fire services tax under Presidential Decree No. 1185, it is suggested that your inquiry be directed to the Office of the Insurance Commissioner who has jurisdiction over said matter. cdt Very truly yours, RUBEN B. ANCHETA Acting Commissioner