BIR Ruling No. 137-83

July 27, 1983 BIR RULING NO. 137-83 Gentlemen : This refers to your letter dated April 20, 1982 requesting this Office to waive the imposition of documentary stamp tax on the letters of credit established in favor of the winning bidder in the International Competitive Bidding for project implementation, and vehicles, supplies and equipment procurement undertaken by the National Extension Project (NEP). It is represented that the Ministry of Agriculture thru the National Extension Project has obtained a loan amounting to $35 Million from the International Bank of Reconstruction and Development of which it intends to implement its projects to accelerate and sustain technology transfer, increase food production, etc. and finance the procurement of vehicles, supplies and materials. For this purpose, it will establish or open letters of credit in favor of the winning bidders. In reply, please be informed that pursuant to Section 23, P.D. No. 1177, all units of governments are subject to all taxes; hence, as an agency under the Ministry of Agriculture, the National Extension Project is subject to documentary stamp tax. Accordingly, the letters of credit that it will open in favor of the implementors of its project, and its suppliers of vehicles, supplies and equipment, will be subject to the documentary stamps of P0.20 on each P200.00, or fractional part, of the face value of such letter of credit, or the Philippine equivalent of such face value, if expressed in foreign currency in accordance with Section 231 of the Tax Code which provides: "SEC. 231. Stamp tax on foreign bills of exchange and letters of credit . On all foreign bills of exchange and letters (including orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons) drawn in but payable out of the Philippines in a set of three or more according to the customs of merchants and bankers, there shall be collected a documentary stamp tax of twenty centavos of each two hundred pesos, or fractional part thereof, of the face value of such bill of exchange, or letter of credit or the Philippine equivalent of such face value, if expressed in foreign currency." However, as a government agency, the National Extension Project, is entitled to either a tax subsidy or payments constituting equity contributions in which case, it shall not be required to pay cash or its equivalent. The revenue collecting agencies shall instead issue a "Payment Compliance Certificate" indicating the nature of the assessment and amount due. The subsidy shall be effected through journal vouchers or their equivalent. (See Joint Budget Circular No. 289 and pars. 4, 6 and 9, Finance Circular No. 2-78, implementing Sec., 23, P.D. 1177). Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue