DST Exemption of First and Second Panamanian Ship Mortgages Executed in Panama

October 4, 1988 BIR RULING NO. 480-88 195 068-83 480-88 Gentlemen : This refers to your letter dated June 13, 1988 requesting in behalf of your client, The Hong Kong and Shanghai Banking Corporation (Hong Kong Branch) (HSBC), confirmation of your opinion to the effect that the First and Second Panamanian Ship Mortgage over the vessel, m.v. "Manila Kim" (formerly "Knight Kim") is not subject to documentary stamp tax. It is represented that HSBC granted various banking facilities to Hong Kong Borneo Shipping Company Limited, SPM Holdings Inc., Pacific Shipping Co. Limited, New Southseas Maritime Carriers Co. S.A. and Sabah Maritime Carriers Co. S.A.; that to secure credits, HSBC required the owner of the vessel to execute a First Panamanian Ship Mortgage; that the vessel also became the subject of a Second Panamanian Ship Mortgage in favor of HSBC to secure the indemnity obligations of United Universe, Inc. in connection with letters of guarantee issued by HSBC to Hyundai Heavy Industries Co., Limited, the shipbuilder; that the vessel is bareboat chartered to Regent Shipping Corporation, a Philippine company and now flies the Philippine flag pursuant to PD 760/366/1711; that HSBC has required that the First and Second Panamanian Ship Mortgages be recorded with the Philippine Coast Guard; and that before the Philippine Coast Guard allows the notation of the mortgage the applicant is required to present an official receipt showing payment of the documentary stamp taxes. In reply, please be informed that since the aforesaid First and Second Panamanian Ship Mortgages were executed in Panama, the same are not subject to the documentary stamp tax imposed under Section 195 of the Tax Code, as amended. This is so because a documentary stamp tax, being an excise tax, is applicable only to transactions effected and consummated within the Philippines (BIR Ruling No. 068-83) cdti Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner