Basis in Computation of the Documentary Stamp Tax on Sale of Real Property

October 2, 1991 BIR RULING NO. 205-91 196 082-89 205-91 S i r : This refers to your letter dated February 11, 1991, requesting a ruling regarding the basis of the computation of the documentary stamp tax due on the following represented transaction: "State Financing Center, Inc. entered into a Contract of Sale with Television and Production Exponent, Inc. to pay by installment a parcel of land and a residential unit constructed under RA 4726, otherwise known as Condominium Act. "The Contract of Sale was signed on November 10, 1983 with a total consideration of P572,172.01. Complete payment was made in 1988. Deed of Absolute Sale of Conveyance was executed on January 31, 1991." You stated that you are of the opinion that the documentary stamp tax should be based on the amount stated in the Contract of Sale and not on the market value of the property at the time the Deed of Absolute Sale was executed on January 31, 1991. In reply, please be informed that your opinion is confirmed. This Office had ruled that the documentary stamp on sales of real property shall be affixed at the time the taxable document is executed. (BIR Ruling No. 304-88) and at the rates then in force (BIR Ruling No. 227-88). Accordingly, the deed of sale in question executed on November 10, 1983 is subject to the documentary stamp tax at the rates in force under then Section 245 of the Tax Code and shall be based on the amount of P572,171.01 which is the actual consideration/selling price, and not on the market/zonal valuation at the time of the execution of the Absolute Deed of Sale in January, 1991. However, if upon investigation it will be disclosed that the amount of documentary stamp tax payable has been reduced by an incorrect statement of the consideration in the deed of sale executed between State Financing Center, Inc. (now State Investment House, Inc.) and Television and Production Exponent, Inc., this ruling will be revoked and the true market value or zonal value will be utilized as basis of the documentary stamp tax. cdtech Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner (Officer-in-Charge)