Tax law in the Philippines covers national and local taxes. National taxes refer to national internal revenue taxes imposed and collected by the national government through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected by the local government. The Tax Code of 1997, Revenue Issuances, and BIR Rulings pertaining to national taxes are posted at the BIR website. Through this article, we will help you understand one of the types of tax levied in the Philippines, the Documentary Stamp Tax.
What is a Documentary Stamp Tax?
According to the BIR, Documentary Stamp Tax or commonly referred to as Documentary Tax is a type of tax levied on documents, instruments, loan agreements, and paper evidencing the acceptance assignment, sale, or transfer of an obligation, right, or property incident thereto. Documentary tax is not unique in the Philippines. As a matter of fact, the Philippines is the second country, after only Myanmar, in Southeast Asia to levy this kind of tax on 04 August 1904 through the enactment of the Internal Revenue Law. In addition to Myanmar and the Philippines, six other Southeast Asian countries levied a similar tax on transactions namely, Brunei Darussalam, Cambodia, Indonesia, Malaysia, Singapore, and Thailand according to the Comparative Documentary Stamp Tax Imposed by ASEAN Countries (2015).
Documentary Stamp Tax is applicable upon the realization or execution of a wide range of transactions. The primordial source for the list of transactions where documentary tax is levied was specified under Title VII of the National Internal Revenue Code of 1997, otherwise known as the Tax Code of the Philippines. The provisions under Title VII have since been amended by government issuances, including the most recent amendment to this tax, the Republic Act no. 10963 or Tax Reform for Acceleration and Inclusion (TRAIN) Law.
The enactment of TRAIN law aims to make the Philippine tax system simpler, fairer, and efficient to encourage local and foreign investments and generate more employment. Above all, the law aims to increase government revenues through better taxation. Aside from the Documentary Stamp Tax, TRAIN law introduced changes to other taxes like Personal Income Tax, Donor’s Tax, Estate Tax, and Value-added Tax, among others.
Under section 179 of the TRAIN Law, documentary stamp tax increases by 100% exempt on debt instruments which only increases by 50%. While other transactions where the documentary stamp tax is applicable like policies of insurance on the property, fidelity bonds and other insurance (section 185), indemnity bonds (section 187), deeds of sale, conveyances, and donation of real property (section 196) which remain unchanged.
Documentary Stamp Tax Rate in the Philippines
Documentary Tax in the Philippines varies according to the type of transaction. For a full list of 24 documents or transactions on which documentary stamp tax should be applied, you can check out the BIR’s Tax Rate table. Real estate-related transactions, like purchasing house and lot or condominium units are not spared from the documentary stamp tax.
Below are 3 of the transactions where documentary stamp tax is levied.
Tax Code Section Document Taxable Unit Tax Due Per Unit % of Unit Taxable Base
- 184 Policies Of Insurance upon Property P4.00 premium or fraction thereof .50 12.5% Premium charged
- 195 Mortgage or Pledge of lands, estate, or property and Deeds of Trust First 5,000 On each P5,000 or fractional part thereof in excess of 5,000 40.00 20.00 .8% .4% Amount Secured Amount Secured
- 196 Deed of Sale, Conveyances, Donations of Real Property (except grants, patents or original certificate of adjudication issued by the government) First 1,000 For each additional P1,000 or fractional part thereof in excess of P1,000 15.00 15.00 1.5% 1.5% Consideration or Fair Market Value, whichever is higher (if the government is a party, basis shall be the consideration) Consideration or Fair Market Value, whichever is higher (if the government is a party, the basis shall be the consideration)
Who Shall File the Documentary Stamp Tax?
1. In the case of constructive affixture of documentary stamps, by the person making, signing, issuing, accepting, or transferring documents, instruments, loan agreements and papers, acceptances, assignments, sales, and conveyances of the obligation, right, or property incident thereto wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines and at the same time, such act is done or transaction had;
2. In the case of Electronic Documentary Stamp Tax (eDST) System users, by the taxpayers belonging to the industries mandated to use the web-based eDST System in the payment/remittance of DST liabilities and the affixture of the prescribed documentary stamp on taxable documents and taxpayers who, at their option, choose to pay the DST liabilities thru the eDST System pursuant to Revenue Regulations (RR) No. 7-2009; and
3. By a revenue collection agent for remittance of sold loose documentary stamps.
Whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax.
When and Where to File and Pay?
The return shall be filed within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred or upon remittance by revenue collection agents of collection from the sale of loose documentary stamps.
The return shall be filed with the Authorized Agent Bank (AAB) within the territorial jurisdiction of the Revenue District Office where the residence or place of business of the taxpayer is located or where the collection agent is assigned. In places where there are no AABs, the return shall be filed directly with the Revenue Collection Officer (RCO) within the Revenue District Office which has jurisdiction over the residence or place of business of the taxpayer or where the collection agent is assigned.
1. For eDST System User
Prior to the enrollment in the eDST System, taxpayers availing thereof, whether on a mandatory or optional basis, shall be duly enrolled under the BIR Electronic Filing and Payment System (eFPS). In paying the DST liabilities, BIR Form No. 2000 shall be filed and the amount due thereon shall be paid through the eFPS for taxpayers and PhilPass Facility of the Bangko Sentral ng Pilipinas for banks (AABs and non-AABs).
2. For eFPS Taxpayer
The deadline for electronically filing and paying the taxes due thereon shall be in accordance with the provisions of existing applicable revenue issuances.
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