Exemption of PHILCOMSAT from Payment of Documentary Stamp Tax

November 21, 1985 BIR RULING NO. 208-85 224 182-81 208-85 Gentlemen : This refers to your letter dated November 12, 1985, requesting confirmation of your opinion that PHILCOMSAT is exempt from the payment of documentary stamp tax on the original issue of certificates of stock to its stockholders. In reply, please be informed that under Section 224 of the Tax Code, as amended by P.D. No. 1959, effective October 15, 1984, which provides as follows: "Sec. 224. Stamp tax on original issue of Certificate of Stocks . On every original issue, whether on organization, reorganization or for any lawful purpose, or certificates of stock by any association, company or corporation, there shall be collected a documentary stamp tax of one peso and seventy centavos on each two hundred pesos or fractional part thereof, of the par value of such certificates . . .". a documentary stamp tax is imposed on every original issue of a certificate of stock, and that it is in the nature of an excise tax, because it is levied upon the privilege, the opportunity and the facility of issuing the stock certificate. The cost of imposition is borne by the corporation originally issuing the stock certificate. ( Philippine Consolidated Coconut Industries vs. Collector of Internal Revenue , 70 Phil. 24) Accordingly, documentary stamp tax is a direct liability imposable on PHILCOMSAT on the original issue of certificates of stock to its stockholders. However, since, as a franchise holder, the payment of 5% franchise tax on gross receipts from its satellite transmission business is in lieu of all other taxes , pursuant to Section 8 of R.A. No. 5514, as restored by P.D. No. 990, it is exempt from the payment of documentary stamp tax on the original issue of stock certificates to its stockholders. The said tax exemptions are not withdrawn by P.D. No. 1955, as implemented by Ministry Order Nos. 35-84 and 39-84, which respectively provide that the withdrawal of tax exemption under P.D. No. 1955 "does not affect those covered by the non-impairment clause of the Constitution, such as franchises", and "does not apply to exemption or preferential treatment embodied in the following laws: a) The National Internal Revenue Code, as amended. . . ." ( B.I.R. Ruling No. 267-000-00-031-85 dated February 27, 1985). In the case of service contractors engaged in petroleum operations, which also enjoy exemption from all taxes, except income tax, under Sec. 12, P.D. No. 87, this Office ruled that they are exempt from the payment of documentary stamp tax on original issue of certificates of stock, checks, promissory notes and upon documents subject to documentary stamp tax, which documents are issued in connection with their petroleum operations. (B.I.R. Ruling No. 222-106-81-182-81) Such being the case, your opinion that PHILCOMSAT is exempt from the payment of the aforementioned documentary stamp tax is hereby confirmed. cdti Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner