DST Imposed on Treasury Bills

February 10, 1988 BIR RULING NO. 036-88 180 000-00 036-88 S i r : This refers to your request for a ruling as to whether treasury bills issued by the Central Bank are subject to the documentary stamp tax. In reply, please be informed that treasury bills are issued as evidence of indebtedness of the Philippine Government whenever it is necessary to borrow funds to meet public expenditures authorized by law or to provide for the purchase, redemption or refunding of any obligations, either direct or guaranteed, of the Philippine Government. Treasury bills are issued on a discount basis and payable at maturity without interest; they may be offered for sale either on a competitive basis or at a fixed rate of discount and may be made payable at any date not later than one year from the date of issue. (Sec. 1, Republic Act No. 245, as amended) It is to be noted that treasury bills are considered as deposit substitutes which are alternative forms of obtaining funds from the public, other than deposits, through the issuance, endorsement or acceptance of debt instruments for the purpose of financing their own needs. [Sec. 20(y), Tax Code, as amended by PD No. 1959] Thus, Section 2(h) of Revenue Regulations No. 17-84 dated October 12, 1984 states that: "(h) " Deposit substitutes " shall mean xxx xxx xxx "(iii) In the case of other non-financial companies, including the national and local government and its instrumentalities, all borrowings through the issuance of debt instruments denoted as treasury bonds, treasury bills, treasury notes and similar instruments." Section 2 of Revenue Regulations No. 17-84 also states that in line with the foregoing definitions, the following borrowings shall be considered as deposit substitutes: xxx xxx xxx "(b) All borrowings of the national and local government and its instrumentalities including the Central Bank of the Philippines, evidenced by debt instruments denoted as treasury bonds, bills, notes, certificates of indebtedness and similar instruments." Accordingly, since treasury bills are considered deposit substitutes, they are subject to the documentary stamp tax of P0.20 on each P200.00 of the face value thereof pursuant to Section 229 (now renumbered as Section 180 by Executive Order No. 273) of the Tax Code, as amended by PD No. 1959, quoted as follows: "Sec. 229. StampTax on Promissory Notes, Bills of Exchange Drafts, Certificates of Deposit, Debt Instruments Used for Deposit Substitutes and Others not Payable on Sight or Demand . On all bills of exchange (between points within the Philippines), drafts, or certificates of deposits, debt instruments used for deposit substitutes or orders for the payment of any sum of money otherwise that at sight or on demand, on all promissory notes, whether negotiable or non-negotiable except bank notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of twenty centavos on each two hundred pesos, or fractional part thereof, of the face value of any such bill of exchange, draft, certificate of deposit, debt instrument, or note." (Emphasis ours) It may be stated that under then Section 248 of the Tax Code, among the documents and papers not subject to documentary stamp tax are those enumerated in paragraph (1) thereof, namely: "bonds, debentures and certificate of indebtedness issued by the Government of the Philippines or the government of any province, city or municipality." However, under PD No. 1994 effective January 1, 1986 said paragraph (1) was deleted in the enumeration, which deletion has the effect of withdrawing the exemption of said documents issued by the Government and its political subdivisions from the documentary stamp tax. [See Sec. 199 (formerly Section 248) Tax Code, as amended by Executive Order No. 273] In view thereof, this Office is of the opinion as it hereby holds that treasury bills by the Central Bank under Republic Act No. 245 as amended, shall be subject to the documentary stamp tax of P0.20 each P200.00, or fractional part thereof beginning January 1, 1986 . cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner