Whether the Maturity Date Extension of a Certificate of Time Deposit Bearing Interest Is Subject to Documentary Stamp Tax

April 8, 1986 BIR RULING NO. 041-86 229 000-00 041-86 Gentlemen : This refers to your letter dated October 9, 1985 requesting confirmation of your opinion that the extension of the maturity date of a certificate of time deposit bearing interest is not subject to documentary stamp tax because only renewals are contemplated under Section 193 (formerly Sec. 229) of the Tax Code, as amended. In reply, I have the honor to inform you that the stand taken by you is not warranted by law and jurisprudence. Section 193 of the Tax Code as amended provides: "Sec. 193. Stamp Tax 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 deposits substitutes, or orders for the payment of any sum of money otherwise than 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." The word "renewal" has different meanings, varying with the subjects with reference to which it is used. One of the definitions of the word "renew" found in Webster's New International Dictionary is: "To grant or obtain extension of; to continue in force for a fresh period; as to renew a note or a bond". As commonly used with reference to notes and bonds, the word "renewal" imports a postponement of the maturity of the obligation dealt with, an extension of the time in which that obligation may be discharged . (Emphasis supplied, Campbell River Timber Co. v. Vierhus, 198 American Law Reports, 763; 86 F. (2d) 673) In other words, the term "extension" has the same connotation as "renewal" which means the continuance of the old obligation. In view of the foregoing considerations, this Office is of the opinion as it hereby holds that when the maturity date of a certificate of time deposit bearing interest is extended, said certificate is considered renewed. Under Section 44 of Regulations No. 26, the documentary stamp tax imposed by Section 193 of the Tax Code is not merely on the document but also on each and every renewal thereof. "The tax on such renewal should be at the same rate as the tax on the original document." Such being the case, the certificate of time deposit, the maturity date of which has been extended, is subject to the documentary stamp tax at the same rate as the original certificate. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner