Liability for Documentary Stamp Tax due on Insurance Policies Issued to National Food Authority

September 10, 1986 BIR RULING NO. 164-86 186 067-86 164-86 Gentlemen : This refers to your letter, dated August 14, 1986, requesting a ruling as to whether the insurance policies issued by you in favor of the National Food Authority (NFA) is exempt from the documentary stamp tax. Section 6(d) of P.D. No. 4, as further amended by P.D. No. 1485, provides, among others, as follows: "(d) Exemptions In furtherance to the effective implementation of the policy enunciated in this decree the Authority is hereby declared exempt: "i. From payment of all taxes, duties, fees, imposts, charges, costs and restrictions to the Republic of the Philippines, its provinces, cities, municipalities, including the taxes, duties fees, imposts and other charges provided for under the Tariff and Customs Code of the Philippines, R.A. No. 1937, as amended by Presidential Decree No. 34, dated October 27, 1972, and Presidential Decree No. 69, dated November 24, 1972, and all filing, docket, and service fees, bonds and other charges or costs in any court or administrative proceedings in which the Authority may be party. xxx xxx xxx All documents or contracts executed by or in favor of the authority shall also be exempt from the payment of documentary and science stamp taxes and registration fees; Provided, however ,that this exemption shall not apply to taxes and assessments payable by persons or entities transacting business with the Authority." The aforesaid exemption enjoyed by NFA has been restored under FIRB Resolution No. 21-85 dated February 27, 1985. In reply, I have the honor to inform you that the parties in a contract of insurance are the insurer who undertakes to indemnify another and the insured, the person indemnified; the contract of insurance is called the insurance policy. (Sections 6 and 49, Insurance Code). Pursuant to Section 186 of the Tax Code, as amended by P.D. No. 1994, documentary stamp taxes on documents, etc. are payable "by the person making, signing, issuing, accepting, or transferring the same, and at the same time such act is done or transaction had: Provided, that whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax." Accordingly, since NFA enjoys exemption from the payment of the documentary stamp tax while you are not so exempt, then you are the party directly liable for the payment of the documentary stamp tax due on said insurance policies. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner