Documentary Stamps Required and by Whom to be Paid

April 18, 1990 BIR RULING NO. 064-90 173;179 000-00 064-90 S i r : This refers to your Memorandum dated September 13, 1989, requesting a ruling as to whether documentary stamps are required to be paid and by whom on the following transactions: cdta 1) Personal checks of taxpayers issued abroad and payable to the Commissioner of Internal Revenue to be drawn against their bank accounts abroad, or against their local bank accounts; 2) Bank drafts issued abroad to be drawn from local banks; 3) May the government (BIR) as acceptor of such kinds of check be exempt from the payment of documentary stamp tax, the other parties/taxpayers being non-resident citizens. It appears that Division usually received checks issued abroad payable to the Commissioner of Internal Revenue in payment of income tax of non-resident citizens; that those checks are then transmitted to the Revenue Accounting Division for issuance of the Authority to accept payment, after which, the corresponding BIR Official Receipts are issued by the General Services Division acknowledging receipt of payment from the taxpayer; that the checks are then deposited to the Bureau of Treasury BIR account, which undertakes the clearing with the Philippine Clearing House but for the lack of documentary stamps, the checks are returned to this office by the Bureau of Treasury without being cleared and, therefore, not credited to BIR account. Instances of these are the bank drafts issued by the Bank of America in favor of the Commissioner of Internal Revenue in payment of the 1987 income tax of Mr. Ismael Getubig and that issued by Citibank in Agana, Guam, U.S.A. as payment of the 1987 income tax of Mr. Luis Cerda, both of which were returned to that Division for lack of documentary stamps affixed thereon. In reply, please be informed as follows: (1) Checks issued abroad by non-resident citizens to be drawn against their bank accounts abroad as well as bank drafts drawn from foreign banks are not subject to the documentary stamp tax of twenty centavos imposed under Section 179 of the Tax Code, as amended. This is so because the documentary stamp tax imposed therein applies only to inland checks , drafts or certificates of deposits not drawing interest or order for the payment of any sum of money drawn upon or may be issued by any bank, trust company or any person or persons, companies or corporations at sight or demand. (Section 31, Regulations No. 26, Department of Finance) This means that the checks or drafts are drawn on local banks payable on demand. In the case of checks and bank drafts drawn abroad, they are not inland checks or drafts if they are drawn on foreign banks. (2) Bank drafts drawn abroad but cashed or negotiated with local banks are subject to the documentary stamp tax in accordance with Section 32 of Regulations No. 26. On the other hand, when any bill of exchange, or order for the payment of money drawn in a foreign country but payable in this country is presented for acceptance or payment, there must be affixed upon acceptance or payment of documentary stamp tax of P0.30 on each P200.00 or fractional part thereof imposed by Section 181 of the Tax Code. (Section 46, Regulations No. 26) (3) Although the issuers of the bank drafts in case (2) are the ones directly liable for the tax, the government (BIR) as acceptor of said bank drafts may be held liable for payment thereof, pursuant to Section 173 of the Tax Code. Very truly yours, (SGD.) JOSE U. ONG Commissioner