Documentary Stamp Tax — Burden of Payment

December 12, 1979 BIR RULING NO. 106-79 Documentary stamp tax burden of payment This refers to your letter dated October 16, 1978 requesting certification of exemption from documentary stamp taxes under the provisions of Republic Act No. 5186. It is represented that as a BOI registered pioneer enterprise under R.A. No. 5186 you are, entitled to exemption from all taxes, except income tax on a graduated scale. [Sec. 8(a), Republic Act No. 5186, as amended by P.D. 92]; and that on February 28, 1978, Elizalde Steel Consolidated Inc., (ELISCON) which is also a registered pioneer enterprise under R.A. No. 5186, executed a Deed of Sale in your favor whereby ELISCON sold to you its cold rolling mill facilities located in Pasig, Metro Manila. One of the provisions of the said Deed of Sale stipulates that: "All expenses, including documentary and science stamps, for the preparation, execution, delivery and/or registration" of the Deed of Sale and all collateral documents thereto shall be borne equally between ELISCON and PSC." In other words, you allege that PSC as Vendee and ELISCON as Vendor, have equally assumed payment of the documentary stamp taxes due on the Deed of Sale in question. In reply, I have the honor to inform you that pursuant to Section 222 of the Tax Code of 1977, the documentary stamp taxes due on the documents shall be paid by the person, making, signing, issuing, accepting or transferring the same, which provision of law was interpreted by the Court of Tax Appeals as placing the burden of paying the tax upon the parties to the contract and leaves the tax to be paid indifferently by either party, and accordingly, the party assuming payment of said taxes becomes directly liable therefor. (Sta. Clara Lumber Co., Inc. vs. Jose Aranas, CTA Case No. 502, June 12, 1969). As the vendor and vendee which are both registered pioneer enterprises are equally liable for the payment of the documentary stamp tax, the Deed of Sale herein abovementioned is partially exempt from the documentary stamp tax to the extent prescribed in Section 8(a) of Republic Act No. 5186, as amended by Presidential Decree No. 92. In other words, ELISCON as the vendor and you as the vendee shall be entitled to the exemption from documentary stamp tax, under the conditions prescribed in said provision of Republic Act No. 5186, as amended. In your case, you are entitled to 75% exemption in view of the letter to you dated September 12, 1979 of the Board of Investments. cd