Addendum to Promissory Note Not Subject to Doc. Stamp Tax

May 3, 1993 BIR RULING NO. 171-93 ADDENDUM TO PROMISSORY NOTE NOT SUBJECT TO DOC. STAMP TAX 180 000-00 171-93 Development Bank of the Philippines Masbate Branch Masbate, Masbate Attention: Ms . Eva Almario-Castillo Acting Dept . Manager II This refers to your letter dated January 21, 1993, stating that xxx xxx xxx "DBP requires its borrowers to affix a documentary stamp tax on each "renewal" of a promissory note using an addendum, a sample copy of which is hereto attached for your reference. This "renewal", however, is a mere extension of the promissory note for the purpose of collection of interest and not a renewal of the credit obligation. Stated differently, the loan is still outstanding but the borrower has to pay a periodic interest on such loan depending on the cash conversion cycle of his business and for every such period, the borrower executes the addendum with a documentary stamp, thus a borrower may have to pay twelve (12) times a year for documentary stamps for one and the same obligation." aisadc and requesting a ruling on the following query: "Is this renewal contemplated by Section 180 of the NIRC, or is it limited only to an expired loan obligation where the borrower wishes to renew the loan"? In reply, please be informed that a close scrutiny of the Addendum to Promissory Note (marked as Annex "B" in your letter) shows that it is actually a renewal of the promissory note executed by a borrower. This is obvious from the 1st condition stated in the said addendum, i.e., "that the subject promissory note shall be considered extended and/or renewed for a period of . . . provided all accrued interest and other extension and/or renewal charges are paid to DBP on or before the date(s) of maturity(ies) . . .". In short, upon the execution of said document (addendum) the loan secured by a promissory note is automatically renewed and/or extended when it reaches its maturity period even without the necessity of the borrower executing another loan document. Such being the case, since Section 180 of the Tax Code imposes a documentary stamp tax not merely on the documents enumerated therein but also on each and every renewal of such document, the Addendum to Promissory Note adverted to in your query, is subject to the documentary stamp tax under the said Section 180 of the Tax Code. cd EUFRACIO D. SANTOS Deputy Commissioner of Internal Revenue