BIR Ruling No. 143-10

December 13, 2010 BIR RULING NO. 143-10 Sec. 106, TC; Sec. 109 (R),TC; 000-00 Padilla Law Office 7/F Padilla-De Los Reyes Building 232 Juan Luna Street Binondo, Manila Attention: Atty. Sabino Padilla, Jr. Gentlemen : This refers to your letter dated March 24, 2009 on behalf of your client, St. Paul College of San Rafael stating the reason for its failure to affix the P15.00 documentary stamp tax (DST) on diplomas it issued to its graduates of the elementary and secondary courses in school years 2006-2007 and 2007-2008 and requesting that the Bureau of Internal Revenue thru BIR Revenue District Office No. 25-Plaridel, Bulacan desist from assessing the aforesaid DST. You stated that Revenue Regulations No. 26, otherwise known as the Documentary Stamp Tax Regulations, provides that only certificates issued by a person having a public office or official status is subject to the DST on certificates. It is your opinion that since the school officials ( i.e. , the president, the dean or principal, the registrar) who sign diplomas, transcripts of records and other documents are not public officials or persons acting in a public capacity, Section 188 of the National Internal Revenue Code (NIRC) does not apply to certificates issued by them. In reply, please be informed that the above issue has been settled in the case of Insular Life Assurance Co., Ltd. vs. CIR, (CTA Case No. 1963, October 7, 1970) where in the court clarified that the term 'certificate' found in Section 225 (now Section 188) of the Revenue Code and Section 75 of Revenue Regulations No. 26 which implemented the statutory provisions, shows that the documents subject to the stamp tax are not limited to only those certificates issued by a public official or person acting in a public capacity but they include a certificate of any description "which is issued for the purpose of giving information, or establishing proof of a fact" not otherwise specified in said Section 225 (now Section 188) of the Revenue Code. The court held as follows: "The provisions of Section 76 of the Documentary Stamp Tax Regulations of the Department of Finance stating that 'only those certificates issued by a public official or a person acting in a public capacity are subject to the documentary stamp tax' are not exclusive and all-embracing in scope and operation. For instance, Section 225 of the Revenue Code provides that 'on each certificate of damage, or otherwise' there shall be collected a documentary stamp tax of P0.30 (now P1.50). Consequently, a certificate of any description issued by a private individual is subject to the documentary stamp tax provided that the said certificate or report is listed, enumerated, or described under Section 225 of the Revenue Code. TSIEAD Moreover, it is a cardinal rule in taxation that in case of conflict between the statutory provisions and the implementing regulations, the clear language of the statute should be upheld. To stress our point, the term 'certificates' as defined under Section 75 of Revenue Regulations No. 26 of the Department of Finance, supra , includes a writing by which testimony is given that a fact has or has not taken place. Neither the law nor the regulation requires that the said certificate or regulation requires that the said certificate or report be issued by a public official or person acting in a public capacity. In the same manner, Section 109 of the Documentary Stamp Tax Regulations of the Department of Finance which provides that 'medical certificates containing a statement of the physical condition of any person are subject to this tax' does not require that the said certificate be issued by a public official or person acting in a public capacity in order to be taxable." Take note that the above case was appealed to the Supreme Court but the same was dismissed for lack of merit. Section 3 (b) of Revenue Regulations No. 9-2000 dated August 31, 2000, as reiterated in Revenue Memorandum Circular No. 025-08, providing for the mode of payment and remittance of the DST states that "(1) If one of the parties to the taxable transaction is exempt from the tax, the other party who is not exempt shall be the one directly liable for the tax, in which case, the tax shall be paid and remitted by the said non-exempt party, unless otherwise provided in these Regulations. (2) If the said tax-exempt party is one of the persons enumerated in Section 3(c)(4) hereof, he shall be constituted as agent of the Commissioner for the collection of the tax, in which case, he shall remit the tax so collected in the same manner and in accordance with the provisions of Section 200 of the Code: Provided, however, that if he fails to collect and remit the same as herein required, he shall be treated personally liable for the tax, in addition to the penalties prescribed under Title X of the Code for failure to pay the tax on time. xxx xxx xxx" On the other hand, Section 3 (c) (4) of the above regulations provides, viz. : "Sec. 3. Mode of Payment and Remittance of Tax. xxx xxx xxx (4) When one of the parties to the taxable document or transaction is included in any of the entities enumerated below, such entity shall be responsible for the remittance of the stamp tax prescribed under Title II of the Code: Provided, however, that if such entity is exempt from the tax herein imposed, it shall remit the tax as a collecting agent, pursuant to the preceding paragraph 3(b)(2) hereof, any provision of these Regulations to the contrary notwithstanding: xxx xxx xxx (e) An educational institution in respect of issuance of taxable certificates ( e.g. , Diploma, Transcript of Records, and other documents taxable as certificates under Section 188 of the Code);" Applying the foregoing, although educational institutions are exempt from DST, it is, however, included in the above enumeration. Therefore, educational institutions are collecting agents for purposes of remitting the DST on diploma, transcript of records, and other documents taxable as certificates under Section 188 of the National Internal Revenue Code, issued by it in favor of non-exempt persons or entities ( i.e. ,graduates). In view of the foregoing, this Office regrets to deny your request that BIR Revenue District Office No. 25-Plaridel, Bulacan desist from assessing the DST on diplomas issued by St. Paul College of San Rafael to its graduates of the elementary and secondary courses in school years 2006-2007 and 2007-2008. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. HAEDCT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue