Exemption of Instruments of Any Rural Bank and Its Mortgagors or Borrowers

August 4, 1959 BIR RULING NO. 392-59 The Acting Director Department of Rural Banks Central Bank of the Philippines M a n i l a S i r : Referring to your letter of July 23, 1955 requesting information on the queries propounded therein, I have the honor to furnish you the following information: Section 17 of Republic Act No. 720 exempts instruments of any Rural Bank and its mortgagors or borrowers from all charges, fees, and documentary stamp tax, relative to any loan or transaction not exceeding two thousand pesos provided that charges if any shall be collectible on the amount in excess of P2,000.00. Accordingly, if the loan or transaction exceeds P2,000.00 the same is subject to documentary stamp tax prescribed in sections 217 or 232 of the National Internal Revenue Code, as the case may be, based on the amount in excess of P2,000.00. In case the loan is released by installments the following provisions of section 232 shall be followed in computing the tax: ". . . On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the payment of a fluctuating account or future advances without fixed limit, the documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however , That if the full amount of the loan or credit granted under the mortgage, pledge or deed of trust, is specified in such mortgage, pledge or deed of trust, the documentary stamp tax prescribed in this section shall be paid and computed on the full amount of the loan or credit granted." The documentary stamp tax on a mortgage is based on the amount secured by the mortgage. Where the total amount secured by the mortgage is not indicated in the document, the documentary stamp tax shall be computed on the amount actually loaned or given at the time of the execution of the mortgage. If additional amounts are given under the same instrument, the amounts loaned shall be consolidated and the documentary stamp tax shall be computed on such amount in excess of P2,000.00. However, if the full amount is indicated in the document the tax shall be computed on the amount in excess of P2,000.00 of the full amount indicated in the document. With respect to your last query, I have the honor to inform you that in case the mortgage is simultaneously executed with the promissory note, one tax only shall be collected upon such documents, said tax to be at the highest rate imposed on such mortgage or promissory note. The insurance policy will also be subject to the documentary stamp tax prescribed in section 221 of the Tax Code. aisadc Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue