Renewal of a Promissory Note on an Indemnity Agreement Will Not Give Rise to Any Documentary Stamp Tax

December 9, 1968 BIR RULING NO. 038-68 The Equitable Insurance and Casualty Co., Inc. 5th Floor Equitable Bank Building Juan Luna Street, Manila Attention : Mr . Roque D . Yap Vice-Pres . & Treasurer Gentlemen : This refers to your undated Request for an Opinion stating as follows: "In case a customer comes to our office and requests us to guarantee him for a character loan from the bank he executes a promissory note in favor of the bank, and an indemnity agreement in our favor. The corresponding documentary stamps of P1.05 is affixed to the indemnity agreement. At maturity of the promissory note the total amount of the note is charged against our current account with the bank. "Now comes the customer and requests for the renewal of the promissory note. We then charge him with the renewal premium, bank charge and interest as per sample attached. The question now is where will we affix the corresponding documentary stamps for the premium when the indemnity agreement is not renewed?" In reply, I have the honor to inform you that since the indemnity agreement is not renewed, there being no necessity for such renewal as the efficacy thereof subsists for as long as the principal obligation remains outstanding and unsettled, the renewal of the promissory note will not give rise to any documentary stamp tax consequence as regards the indemnity agreement. cdt Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue