Basis of DST on the New Shares of Stock

February 12, 1987 BIR RULING NO. 043-87 188 000-00 043-87 Gentlemen : This refers to your letter dated January 21, 1987 requesting in effect the basis of the documentary stamp tax on the new shares of stock issued under the following circumstances: "1. An existing corporation is authorized under its approved Articles of Incorporation to issue 100 common shares with par value per share of P10. "2. Of the authorized shares, 35 have been subscribed and paid for at par. "3. Said corporation obtained SEC approval to amend its Articles of Incorporation in order to increase its authorized capital stock by 100 shares. "4. Of the new shares, 25 shall be subscribed and paid in. The Articles of Incorporation state the equivalent value of these shares only at par. The stockholders however will pay P75 per shares, thus giving rise to premium on the new shares of P65 per share. "5. It was represented that the above arrangement on the new shares was resorted to in order to save on documentary stamps." In reply please be informed that under Section 188 of the Tax Code, as amended by P.D. No. 1959 which provides as follows: "Sec. 188. Stamp Tax on Original Issue of Certificates of Stock . On every original issue, whether on organization, reorganization or for any lawful purpose, of certificates of stock by any association, company, or corporation, there shall be collected a documentary stamp tax of one peso and seventy centavos on each two hundred pesos, or fractional part thereof, of the par value of such certificates; Provided, That in the case of the original issue of stock without par value the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration received by the association, company, or corporation for the issuance of such stock, and in the case of stock dividends on the actual value represented by each share." the basis for the documentary stamp tax is the par value of the certificate. Accordingly, in the instant case, since the shares by the corporation at the time of the original issuance of the certificate. Accordingly, in the instant case, since the shares of stock to be issued by the corporation have par value, the documentary stamp tax on the original issue of said shares shall be based on the par value per share of P10.00 and not on the consideration per share of P75.00 to the stockholders. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner