3 Reforms on Documentary Stamp Tax (DST) under TRAIN RA 10963 Philippines

By: Garry S. Pagaspas, CPA

Documentary stamp tax (DST) in the Philippines is generally, a tax imposed on the exercise of certain rights to enter into specific transactions, acts, and deeds relative to business or dealings or properties as manifested by related documents and papers. These are imposed under Sections 173 to 201, Title VII of National Internal Revenue Code of 1997 (RA 8424), as last amended by Republic Act No. 10963 or Tax Reform for Acceleration and Inclusion (TRAIN) Package I that has been effective January 1, 2018.

Tax reforms on documentary stamp tax (DST) in the Philippines under TRAIN or RA 10963 is implemented by Revenue Regulations No. 4-2018 (RR 4-2018) dated December 19, 2018 and effective 15 days from publication at the Official Gazette or at a newspaper of general circulation. RR 4-2018 has been published at the Manila Bulletin last January 18, 2018 and its 15th day from publication is February 2, 2018.

Tax reforms on documentary stamp tax (DST) in the Philippines under TRAIN or RA 10963 focused more on rates and on new rules. For reference, below are the summary of tax reforms on DST in Philippines under RA 10963 TRAIN Package 1:

1. New DST on donations of real property in the Philippines

This is a new imposition made under the TRAIN or RA 10963, DST on donations of real property in the Philippines as this was not subject to DST prior to the tax reforms under TRAIN or RA 10963. The DST rate for donations of real property is the same on sales and dispositions of real property under Section 196 of the Tax Code, as amended – PhP15.00 for every PhP1,000.00 of consideration or value, or factional part thereof. This is about 1.5%, PhP15 divided by PhP1,000.00.

This may have been imposed relative to the tax reform on donor’s tax in the Philippines of 6% to level the tax implication of donations to sale of real properties classified as capital asset subject to 6% capital gains tax and 1.5% DST. Accordingly, selling a real property classified as capital asset and donating it may have the same tax implications.

2. 150% increase on DST on loan agreements in the Philippines

Prior to the tax reforms under TRAIN or RA 10963, loan agreements or debt instruments are subject to documentary stamp tax in Philippines imposed under Section 179 of the Tax Code, as amended, at the rate of PhP1.00 for every PhP200.00 or fractional part thereof of the issue price of the loan agreement or debt instrument in the Philippines.

Under the reforms of TRAIN or RA 10963 Package 1 in the Philippines, the PhP1.00 rate had been increased to P1.50 for every PhP200.00 or fractional part thereof of the issue price of the loan agreement or debt instrument in the Philippines.

3. Doubled DST rates on specific taxable transactions and items in Philippines

Aside the from two (2) items above, almost all other provisions on the DST reforms under RA 10963 or TRAIN Package 1 doubled the rates imposed on transactions or documents. Example, DST rates on original issuance of shares at PhP1.00 for every PhP200 par value or consideration became P2.00 for every PhP200.00.

Summary

Tax reforms on Documentary Stamp Tax (DST) under TRAIN or RA 10963 is most on the rates, with the exception of DST on donations of real property. If the rate was the only amendment, this could mean the same rules would apply except for the rate on the computation of applicable DST in the Philippines. At any rate, it would be prudent to refer to the Tax Code, as last amended by TRAIN and the related implementing rule (e.g. RR 4-2018) for the specific applicable rate.

Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for about fifteen (15) years now helping out taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has been helping out some foreign clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.

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