BIR Ruling No. 221-12

March 29, 2012 BIR RULING NO. 221-12 Section 199 (d) NIRC; RR No. 13-2004 Lupo S. Ramos & Co. Certified Public Accountants LK Building MacArthur Highway Dolores, San Fernando City Pampanga Attention: Marylou Ramos-Tolentino Managing Partner Gentlemen : This refers to your letter dated October 20, 2009, requesting clarification on the covered loan agreements or promissory notes which are exempt from documentary stamp tax under Section 199 (d) of the National Internal Revenue Code (NIRC) of 1997, as amended. It is represented that your clients are in the lending business, extending personal loans to others, in amounts that could be as low as Php5,000.00 and high as Php30,000.00, made for various purposes, such as payment of basic necessities, like food, medicines, hospitalization and other health sustenance, utilities, tuition fees of dependents and house repair. It is contended that the loan agreements covering amounts which do not exceed Php250,000.00 and made for purposes mentioned above, fall within the purview of Section 199 (d) of the NIRC, as implemented by Revenue Regulations (RR) No. 13-2004, which states that: "SEC. 199. Documents and Papers Not Subject to Stamp Tax. The provisions of Section 173 to the contrary notwithstanding, the following instruments, documents and papers shall be exempt from the documentary stamp tax: aSIHcT xxx xxx xxx (d) Loan agreements or promissory notes, the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000), or any such amount as may be determined by the Secretary of Finance, executed by an individual for his purchase on installment for his personal use or that of his family and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture : Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance with a relevant price index but not to exceed ten percent (10%) of the current amount and shall remain in force at least for three (3) years ." (underscoring supplied) In reply, please be informed that the above-quoted provision is very clear that only those loan agreements or promissory notes, the aggregate of which does not exceed two hundred fifty thousand pesos (P250,000.00), executed by an individual, for his purchase, on installment, of a house, lot, motor vehicle, appliance or furniture, are exempt from the payment of the DST. The above provision requires the concurrence of these two conditions in order that a loan document may be exempt from DST: (1) the aggregate amount of the loan does not exceed two hundred fifty thousand pesos (P250,000), or any such amount as may be determined by the Secretary of Finance; and (2) the loan document is executed by an individual for his purchase, on installment, for his personal use or that of his family and not for business or resale, barter or hire, of a house, lot, motor vehicle, appliance or furniture. Thus, if the loan agreement exceeds the threshold amount, even if executed for the purposes stated above, the same is subject to DST. In the same vein, if the loan agreement is executed for purposes other than for the purchase of a house, lot, motor vehicle, appliance or furniture, the said loan agreement, regardless of the amount, shall be subject to the payment of DST. It cannot be over-emphasized that tax exemption represents a loss of revenue to the government and must, therefore, not rest on vague inference. Thus, in establishing tax exemptions, it should be borne in mind that taxation is the rule, exemption is the exception. Accordingly, statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. One who claims an exemption from tax payments rests the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted. Exemption from taxation is never presumed. For tax exemption to be recognized, the grant must be clear and express; it cannot be made to rest on doubtful implications. ( Michel J. Lhuillier Pawnshop, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166786 dated May 3, 2006) HTCDcS Thus, unless expressly mentioned in the law, Section 199 (d) of the NIRC, as amended, cannot apply to loan agreements other than those specifically and expressly provided therein. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue