Basis for the Determination of the Documentary Stamp Taxes Payable on Chattel Mortgage

November 22, 1990 BIR RULING NO. 218-90 195 000-00 218-90 Gentlemen : This refers to your letter dated September 26, 1990 requesting in behalf of your client, Marubeni Corporation (Marubeni, for brevity) for a ruling on the proper basis for the determination of the documentary stamp taxes payable on a chattel mortgage. aisadc It is represented that on May 31, 1985, Marubeni, as mortgagee, and Maricalum Mining Corporation (Maricalum, for brevity), as mortgagor, executed a Chattel Mortgage to secure the repayment by Maricalum of the advance payment to be made by Marubeni in the maximum principal sum of approximately Twelve Million United States Dollars (US$12,000.00); that at the time of the execution of the Chattel Mortgage, Maricalum was enjoying a suspension of payment of all taxes, duties, fees, imposts and other charges, whether direct or indirect, due and payable to the National and Local governments by virtue of LOI No. 1416; that subsequently and on seven occasions, Marubeni and Maricalum executed Addenda to the Chattel Mortgage pursuant to a provision thereof whereby the parties agreed that in the event the aggregate market value shall fall below 150% of the loans and obligations mentioned in the mortgage, the Mortgagor shall transfer and convey, as further security, all its rights, title and interests in after acquired properties; that the Seventh Addendum contemplates the mortgage of equipment worth P18,297,600.87; that the corresponding documentary stamp tax was not paid by Maricalum on the Chattel Mortgage nor in the Seven Addenda by virtue of the suspension of payments under LOI No. 1416 and also because there has been no change in the amount of loan secured by the mortgage; and that in view of the lifting of the suspension of payments under LOI No. 1416, the Register of Deeds is now requiring payment of documentary stamp tax for the registration of the Seventh Addendum. In reply, please be informed that, pursuant to Section 195 of the Tax Code, as amended, the documentary stamp tax shall be computed on the amount actually loaned or given at the time of the execution of the Chattel Mortgage on May 31, 1985 and not on the value of the Seventh Addendum. However, no documentary stamp tax is due on the seven addenda to the mortgage contract, there being no additional amount loaned but only an additional collateral as security to the original loan. The acknowledgment portion of the Seventh Addendum is subject to the P3.00 documentary stamp tax under Section 188 of the same Code. Very truly yours, (SGD.) JOSE U. ONG Commissioner