Exemption of a Chattel Mortgage (Executed Abroad) from the Documentary Stamp Tax

March 27, 1989 BIR RULING NO. 045-89 193 068-83 045-89 Gentlemen : This refers to your letter dated February 29, 1989 requesting a ruling whether or not a chattel mortgage constituted over an aircraft which mortgage is executed abroad by a non-resident owner-mortgagor in favor of a non-resident bank or financial institution is subject to the documentary stamp tax under the National Internal Revenue Code. aisadc It is represented that your clients, First Pacific Bank Limited (hereinafter called First Pacific) and Fortis Philippines (3732) Limited (hereinafter called Fortis) are both foreign corporations, the former being organized and existing under the laws of Hong Kong and the latter under the laws of Bermuda; that sometime in August 1988, First Pacific granted Fortis a credit facility in the amount of US$4,270,000.00 to finance the acquisition by the latter of one Shorts SD 360-300 aircraft with Registration Mark VR-BEM and Manufacturer's Serial No. 3732 from Shorts Brothers PLC of Northern Ireland; that to secure the credit, First Pacific required Fortis to execute a chattel mortgage over the aircraft; that this chattel mortgage was executed in Hong Kong that the aircraft subject-matter of the chattel mortgage is presently leased to the Philippine Airlines, Inc.; that First Pacific and Fortis want to register the chattel mortgage contract with the Register of Deeds of Pasay City pursuant to the provisions of the Chattel Mortgage Law; and that the Register of Deeds of Pasay City requires the presentation of an official receipt evidencing payment of documentary stamp tax or in lieu thereof, a ruling that said chattel is not subject to the documentary stamp tax. In reply, please be informed that the chattel mortgage in question, being executed abroad, is not subject to the documentary stamp tax imposed by Section 193 of the Tax Code. This is in consonance with the rulings previously issued by this Office that the documentary stamp tax, being an excise tax, is applicable only to transactions effected and consummated within the Philippines. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner