Foreign Exchange Transaction Tax Can Be Applied in Payment of the Subscribed Capital Stock of the Government to DBP

November 5, 1985 BIR RULING NO. 193-85 260-A 163-85 193-85 Gentlemen : In reply to your letter dated September 4, 1985, I have the honor to inform you that in answer to an earlier query dated August 1, 1985 of that Bank, this Office has ruled that the 1% foreign exchange transaction tax prescribed under Section 260-A of the Tax Code, as inserted by Presidential Decree No. 1959, when directly payable by the DBP in connection with its purchase or sale of foreign exchange, is included among the taxes due to the government which can be applied in payment of the subscribed capital stock of the government to the Bank, pursuant to P.D. No. 1980, amending Section 3(e) of R.A. No. 85 (DBP Charter) (BIR Ruling No. 54-000-00-127-85). However, where domestic banks, in the buying and selling of foreign currency to service DBP's foreign obligations, pass on to DBP the 1% transaction tax, and the latter agrees to pay the same, the domestic banks are still considered the party liable for the payment thereof, and the tax passed on to DBP shall form part of the cost of purchase/sale of the foreign exchange. Such being the case, said tax passed on to DBP cannot be applied in payment of the National Government's subscription to DBP's capital stock. cdtech Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner