A.

Preliminary Topics

Documentary stamp tax

-tax on documents, instruments and papers evidencing the acceptance,

assignment, sale or transfer of an obligation, right or property thereto.

Nature of documentary stamp tax

A documentary stamp tax is an excise or privilege tax because it is really

imposed on the privilege to enter into a transaction rather than on document. The law
taxes the document because of the transaction.

Purpose of documentary stamp tax

The purpose of the law imposing stamp taxes on documents. Instruments and
papers is to raise revenue and not to invalidate contracts or inflict penalties, and courts
should give it a liberal construction.

Accrual of documentary stamp tax

Being a privilege tax, the documentary stamp tax accrues when the privilege is
exercised, regardless of circumstances that may take place in the future like
cancellation or rescission.

Basis of liability

1. The amount of documentary stamp tax payable.

2. The liability to tax and the amount.

Persons liable

1. Both parties to the transaction.

2. Where one party enjoys exemption from the tax.

B. Returns, Payment of the Taxes, and Sanctions

1. In general. – the provisions of Presidential Decree No. 1045 notwithstanding, any

person liable to pay documentary stamp tax upon any document subject to such tax
shall file a tax return and pay the tax in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the Commissioner.

2. Time for filing and payment of the tax. – Except as provided by rules and
regulations promulgated by the Secretary of Finance, upon recommendation of the
commissioner, the tax return prescribed shall be filed within 10 days after the close of
the month when the taxable document was made, signed, issued, accepted or
transferred and the tax there on shall be paid at the same time the aforesaid return is
filed.

3. Where to file. – Except in cases where the Commission otherwise permits, the
aforesaid tax return shall be filed with and the tax due shall be paid through the
authorized agent bank within the territorial jurisdiction of the Revenue District Office
which has jurisdiction ove the residence or principal place of business on the taxpayer.

4. Exception. – In lieu of the foregoing provisions, the tax may be paid either through
purchase and actual affixture or by imprinting the stamps through a documentary stamp
metering machine, on the taxable document, in the manner as may be prescribed by
rules and regulations to be promulgated by the Secretary of Finance, upon the
recommendation of the Commissioner.

Effect of failure to stamp taxable document

1. The instrument, document or paper or any record or transfer

shall not be recorded;

2. Such instrument, document or paper or any record or

transfer of the same shall not be admitted or used in
evidence in any court until the requisite stamp or stamps
shall have been thereon and cancelled;
 3. No notary public or other officer authorized to administer
oaths shall add his jurat or acknowledgement to the
document unless the proper stamps are affixed thereto and
cancelled.

Offenses relating to documentary stamps

1. Making, importing, selling, using or possessing without express

authority from the Commissioner, any die for printing or making
stamps, labels, tags or playing cards.

2. Erasing the cancellation marks of any stamp previously used or

altering the written figures or letters or cancellation marks on
internal revenue stamps

3. Possessing false, counterfeit, restored or altered stamps. Labels,

tags or causing the commission of any such offense by another

4. Selling or offering for sale any box package containing articles

subject to excise tax with false, spurious or counterfeit stamps or
labels selling from any such fraudulent box, package or container
as aforementioned

5. Giving away or accepting from another or selling, buying or using

containers on which the stamps are not completely destroyed.

B. Rates and Bases of the Taxes

On original issue of shares of stock

1. Documents taxable. – Every original issue, whether an

organization, reorganization, or for any lawful purpose, of
shares of stock by any association, company or corporation.

2. Basis and rate tax. –

 a. On shares of stocks with par value

b. On shares of stock without par value

c. On stock dividends

3. Where certificate issued subject to a condition.

On sales, agreements to sell etc. shares or certificates of stock

1. Documents taxable. – All sales or agreements to sell, or

memoranda of sales or deliveries or transfer of shares or
certificates of stock in any association, company or corporation.

2. Accrual of tax. – the tax accrues at the time of making the sale or
agreement to sell or memorandum of sale or delivery of or
transfer of the title of stock or of the right to subscribe for or to
receive such stocks.

3. Transfer by operation of law. – a transfer of certificates of stock by

operation of law as in the case of intestate succession is not
subject to the tax.

4. Nature of transfer. – if the legal and beneficial title remains with

the owner of the certificate of stock, the transfer Is exempt from
tax.

On bonds, debentures, certificates of stock or indebtedness issued in foreign countries

1. Documents taxable. – any of the following defined below issued in any foreign
country:

a. bond

b. debenture

c. certificate of stock
 d. certificate of indebtedness

2. When taxable. – they are taxable if issued, sold or transferred in the Philippines.

3. Basis and rate of tax. – the same tax is imposed upon similar instruments when
issued, sold or transferred in the Philippines.

On certificates of profits or interest in property or accumulations

1. Documents taxable:

a. All certificates of p0rofits or any certificate or memorandum showing interest in

the property or accumulations of any association, company or corporation

b. All transfers of such certificates or memoranda

c. Sales of participation in a partnership are subject to tax because they are

considered accumulations of association, companies or corporations

d. Coupons detached to certificates of stock are certificates of profits and at

maturity or when detached should each bear the stamp

e. Business p0roperty investment bond, wherein it is certified that the holder

thereof is the owner of an interest in a certain specified real property legal title.

On all bills of exchange or drafts

1. Documents Taxable. – the tax applies to all bills of exchange between points within
the Philippines or drafts.

2. Basis and Rate of Tax. – on each P200.00 or fractional part thereof, of the face value
of any such bill of exchange or draft – P0.30.

On indemnity bonds
 1. Documents taxable:

a. All bonds for indemnifying any person, firm or corporation who shall
become bound or engaged as surety for the payment of any sum of money.

b. All other bonds of any description, except such as may be required in

legal proceedings or are otherwise provided therein.

2. Basis and rate of tax. – on each P4.00 or fractional part thereof of the premium
charges – P0.30.
 Chapter 5

Documentary Stamp
Tax

Diana Rose P. Matira

BSBA II