BIR Ruling [UN-179-95]

May 3, 1995 BIR RULING [UN-179-95] R.S. Bernardo & Associates Unit 1810 Cityland Condominium 10 Tower 1 6815 Ayala Avenue cor. H. V. dela Costa Ext. 1200 Makati, Metro Manila Attention: Atty . Rosario S . Bernaldo General Manager Gentlemen : This refers to your letter dated January 24, 1995 requesting for a clarification on whether or not payment of documentary stamp tax on the corporation's initial paid up capital is a pre-requisite to the registration with the BIR of the said corporation as a withholding agent and as a VAT-registered taxpayer. cdta It is represented that your client, CARTA VOGUE, Inc., a newly registered domestic corporation which is not yet operational, is seeking for BIR registration with the Muntinlupa Revenue District Office (RDO) as a withholding agent and as a VAT-registered taxpayer; that upon application for registration, the internal revenue official demanded for the payment of the documentary stamp tax on original issues of certificates of stock based on the paid up capital; that it is your contention that the said tax cannot yet be imposed because the incorporators of your said client have just subscribed and paid in the minimum legal requirement for incorporation under the Corporation Code, which is twenty-five percent (25%) of the subscribed capital stock, and therefore have not yet fully paid the same. In reply, please be informed that since your said client, CARTA VOGUE, Inc., is merely registering with the Bureau as a withholding agent and as a VAT-registered taxpayers, there is no need for it to pay documentary stamp tax on the original issues of the certificates of stock because the same is not a pre-requisite for registration as such. It only needs to accomplish a form prescribed for such purpose and file the same with the Revenue District Office. Section 107 of the Tax Code provides as follows: "SEC. 107. Registration of value-added taxpayers. "(a) In general . Any person subject to a value-added tax under Sections 100 and 102 of this Code shall register with the appropriate Revenue District Officer. A person who maintains a head or main office and branches in different places shall register with the revenue district office which has jurisdiction over the place where the main or head office is located. "(b) Persons commencing a business . Any person who expects to realize gross sales or receipts subject to value-added tax in excess of the amount prescribed by the Secretary of Finance for the next 12-month period from the commencement of the business shall, within 30 days before the start of the said business, register with the Revenue District Officer who has jurisdiction over his principal place of business." Furthermore, on the issue on whether or not payment of documentary stamp tax on the corporation's initial paid up capital is a prerequisite to the registration with the BIR of the said corporation as a withholding agent and as a VAT-registered taxpayer, our answer is in the negative. Section 175 of the Tax Code, as amended, provides as follows: "On every issue, whether on organization, reorganization or for any lawful purpose, of certificates of stock by any association, company, or corporations, there shall be collected a documentary stamp tax . . ." Considering therefore that CARTA has not yet issued, whether actually or constructively, any certificate of stocks to its stockholders because the latter have not yet fully paid their subscriptions, the taxpayer is not yet liable to documentary stamp tax. It is therefore the opinion of this Office, as it hereby holds, that the refusal of the internal revenue official concerned to register CARTA VOGUE, Inc. as a withholding tax agent and as a VAT-registered taxpayer on the ground that it has not yet paid the documentary stamp tax on the original issues of its certificates of stock is utterly baseless the same not being a pre-requisite for the said registration. (BIR Ruling No. 98-94 dated April 22, 1994) In view thereof, the concerned internal revenue official is hereby directed to accept the registration of CARTA VOGUE, Inc. as a withholding agent and as a VAT taxpayer. cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner Legal Service