case digest - opt and dst
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Case Digest for Other Percentage Tax and Documentary Stamp TaxTRANSCRIPT
Other Percentage Tax(Sec 116-128,NIRC) 9/14/20152:31:00 PM
CHINA BANKING CORPORATION vs. CA
G.R. No. 146749. June 10, 2003
On 20 July 1994, China Banking Corporation (CBC)
paid P12,354,933.00 as gross receipts tax on its income from
interests on loan investments, commissions, services, collection charges,
foreign exchange profits and other operating earnings during the second
quarter of 1994.
On 30 January 1996, the Court of Tax Appeals in Asian Bank Corporation v.
Commissioner of Internal Revenue ruled that the 20% final withholding
tax on a banks passive interest income does not form part of its
taxable gross receipts.
On 19 July 1996, CBC filed with the Commissioner of Internal
Revenue (Commissioner) a formal claim for tax refund or credit
of P1,140,623.82 from theP12,354,933.00 gross receipts tax that CBC paid
for the second quarter of 1994.
Citing Asian Bank, CBC argued that it was not liable for the gross
receipts tax - amounting to P1,140,623.82 - on the sums withheld by
the Bangko Sentral ng Pilipinas as final withholding tax on CBCs
passive interest income in 1994.
ISSUES:
1. Whether the 20% final withholding tax on interest income should form
part of CBCs gross receipts in computing the gross receipts tax on
banks;
2. Whether CBC has established by sufficient evidence its right to claim
the full refund of P1,140,623.82 representing alleged overpayment of
the gross receipts tax
RULING:
1. YES, it should be part of CBC’s gross receipt
As commonly understood, the term gross receipts means the entire
receipts without any deduction. Deducting any amount from the gross
receipts changes the result, and the meaning, to net receipts. Any
deduction from gross receipts is inconsistent with a law that mandates a
tax on gross receipts, unless the law itself makes an exception.
As explained by the Supreme Court of Pennsylvania in Commonwealth of
Pennsylvania v. Koppers Company, Inc., -
xxx Under the ordinary basic methods of handling accounts, the term
gross receipts, in the absence of any statutory definition of the
term, must be taken to include the whole total gross receipts
without any deductions.
The Tax Court erred glaringly in interpreting Section 4(e) of
Revenue Regulations No. 12-80. Income may be taxable either at the
time of its actual receipt or its accrual, depending on the accounting
method of the taxpayer. Section 4(e) merely provides for an exception to
the rule, making interest income taxable for gross receipts tax
purposes only upon actual receipt.
Interest is accrued, and not actually received, when the interest is due
and demandable but the borrower has not actually paid and remitted the
interest, whether physically or constructively. Section 4(e) does not
exclude accrued interest income from gross receipts but merely
postpones its inclusion until actual payment of the interest to the lending
bank. This is clear when Section 4(e) states that [m]ere accrual shall
not be considered, but once payment is received on such accrual
or in case of prepayment, then the amount actually received shall
be included in the tax base of such financial institutions x x x.
Thus, interest earned by banks, even if subject to the final tax and
excluded from taxable gross income, forms part of its gross
receipts for gross receipts tax purposes. The interest earned refers
to the gross interest without deduction since the regulations do not
provide for any deduction. The gross interest, without deduction, is the
amount the borrower pays, and the income the lender earns, for
the use by the borrower of the lenders money. The amount of the
final tax plainly comes from the interest earned and is consequently part
of the banks taxable gross receipts.
2. NO
CBC has failed to point to any specific provision of law allowing
the deduction, exemption or exclusion, from its taxable gross
receipts, of the amount withheld as final tax. Such amount should
therefore form part of CBCs gross receipts in computing the gross receipts
tax. There being no legal basis for CBCs claim for a tax refund or credit,
the second issue raised in this petition is now moot.
Section 121 of the Tax Code expressly subjects interest income to the
gross receipts tax on banks. Such express inclusion of interest income
in taxable gross receipts creates a presumption that the entire
amount of the interest income, without any deduction, is subject
to the gross receipts tax.
ANALYSIS:
There is no double taxation when Section 121 of the Tax Code imposes
a gross receipts tax on interest income that is already subjected to the
20% final withholding tax under Section 27 of the Tax Code. The gross
receipts tax is a business tax under Title V of the Tax Code, while the
final withholding tax is an income tax under Title II of the Code. There is
no double taxation if the law imposes two different taxes on the same
income, business or property.
CIR vs PHILIPPINE AIRLINES, INC.
G.R. No. 180043, July 14, 2009
Petitioner is responsible for the assessment and collection of all
national internal revenue taxes, fees, and charges, including the 10%
Overseas Communications Tax (OCT), imposed by Section 120 of the
National Internal Revenue Code (NIRC) of 1997.
Respondent PAL is a domestic corporation and the grantee under
Presidential Decree No. 1590 of a franchise to establish, operate, and
maintain transport services for the carriage of passengers, mail,
and property by air, in and between any and all points and places
throughout the Philippines, and between the Philippines and other
countries.
January to December 2001, the PLDT collected from respondent the
10% OCT on the amount paid by the latter for overseas telephone
calls it had made through the former. In all, PLDT collected from
respondent the amount of P202,471.18 as OCT for 2001
On 8 April 2003, respondent filed with the BIR an administrative
claim for refund of the P202,471.18 OCT it alleged to have
erroneously paid in 2001
RESPONDENT PAL:
Based on its franchise, Section 13 of Presidential Decree No. 1590, which
granted it
the option to pay either the basic corporate income tax on its
annual net taxable income or the two percent franchise tax on its
gross revenues, whichever was lower; and
the exemption from all other taxes, XXX except only real
property tax.
PETITIONER CIR:
argues that the PAL case is not applicable to the case at bar,
since the former involves final withholding tax on interest
income, while the latter concerns another type of tax, the
OCT.
cannot avail itself of the benefit of the in lieu of all other
taxes proviso in Section 13 of Presidential Decree No. 1590
when it made no actual payment of either the basic
corporate income tax or the franchise tax.
ISSUE:
WON the exemption includes OCT
WON THE PHRASE IN LIEU OF ALL OTHER TAXES IN SECTIONS 13 AND
14 OF PRESIDENTIAL DECREE NO. 1590 REQUIRE A CONDITION(Actual
Payment) BEFORE THE EXEMPTION FROM ALL OTHER TAXES MAY BE
APPLIED;
TAX REFUNDS ARE IN THE NATURE OF TAX EXEMPTIONS. AS SUCH,
THEY SHOULD BE CONSTRUED STRICTISSIMI JURIS AGAINST THE
PERSON OR ENTITY CLAIMING THE EXEMPTION.
RULING:
1. YES
The language used in Section 13 of Presidential Decree No. 1590, granting
respondent tax exemption, is clearly all-inclusive.
Even a meticulous examination of Presidential Decree No. 1590 will not
reveal any provision therein limiting the tax exemption of
respondent to final withholding tax on interest income or excluding from
said exemption the OCT.
2. No, no need of actual payment
A careful reading of Section 13 rebuts the argument of the CIR
that the in lieu of all other taxes proviso is a mere incentive that
applies only when PAL actually pays something. It is clear that PD
1590 intended to give respondent the option to avail itself of Subsection
(a) or (b) as consideration for its franchise. Either option excludes the
payment of other taxes and dues imposed or collected by the national or
the local government. PAL has the option to choose the alternative that
results in lower taxes. It is not the fact of tax payment that exempts
it, but the exercise of its option.
Petitioner places too much reliance on the use of the word pay in
the first line of Section 13 of Presidential Decree No. 1590.
It must do well for petitioner to remember that a statutes clauses and
phrases should not be taken as detached and isolated
expressions, but the whole and every part thereof must be considered
in fixing the meaning of any of its parts.
3. Yes but..
when the claim for refund has clear legal basis and is sufficiently
supported by evidence, as in the present case, then the Court shall not
hesitate to grant the same.
In its previous discussion, the Court has already established that by
merely exercising its option to pay for basic corporate income tax
even if it had zero liability for the same due to its net loss
position in 2001 respondent was already exempted from all other
taxes, including the OCT.
Also, the CTA, both in Division and en banc, found that respondent
submitted ample evidence to prove its payment of OCT to PLDT
during the second, third, and fourth quarters of 2001, in the total amount
of P126,243.80, which, in turn, was paid by PLDT to the BIR. Said finding
by the CTA, being factual in nature, is already conclusively binding
upon this Court. Under our tax system, the CTA acts as a highly
specialized body specifically created for the purpose of reviewing tax
cases. Accordingly, its findings of fact are generally regarded as
final, binding, and conclusive on this Court, and will not ordinarily
be reviewed or disturbed on appeal when supported by
substantial evidence, in the absence of gross error or abuse on its part.[
ANALYSIS:
It is true that the discussion in the PAL case on gross income is immaterial
to the case at bar. OCT is not even an income tax. It is a business tax,
which the government imposes on the gross annual sales of
operators of communication equipment sending overseas dispatches,
messages or conversations from the Philippines. According to Section 120
of the NIRC, the person paying for the services rendered
(respondent, in this case) shall pay the OCT to the person
rendering the service (PLDT); the latter, in turn, shall remit the
amount to the BIR.
If this Court deems that final tax on interest income which is also an
income tax, but distinct from basic corporate income tax is included
among all other taxes from which respondent is exempt, then with all
the more reason should the Court consider OCT, which is
altogether a different type of tax, as also covered by the said
exemption.
CIR vs. SOLIDBANK CORPORATION
[G.R. No. 148191. November 25, 2003]
Respondent Solidbank Corp seasonably filed its Quarterly
Percentage Tax Returns reflecting gross receipts (pertaining to 5%
[Gross Receipts Tax] rate) in the total amount of P1,474,691,693.44
with corresponding gross receipts tax payments in the sum
of P73,734,584.60
[Respondent] alleges that the total gross receipts in the amount
of P1,474,691,693.44 included the sum of P350,807,875.15
representing gross receipts from passive income which was already
subjected to 20% final withholding tax.
On January 30, 1996, [the Court of Tax Appeals] rendered a decision in
CTA Case No. 4720 entitled Asian Bank Corporation vs. Commissioner of
Internal Revenue[,] wherein it was held that the 20% final
withholding tax on [a] banks interest income should not form part
of its taxable gross receipts for purposes of computing the gross
receipts tax.
On June 19, 1997, on the strength of the aforementioned decision,
[respondent] filed with [BIR] a letter-request for the refund or
issuance of [a] tax credit certificate in the aggregate amount
of P3,508,078.75, representing allegedly overpaid gross receipts tax for
the year 1995,
ISSUE:
Whether or not the 20% final withholding tax on [a] banks interest income
forms part of the taxable gross receipts in computing the 5% gross
receipts tax.
RULING:
YES
Although the 20% FWT on respondents interest income was not actually
received by respondent because it was remitted directly to the
government, the fact that the amount redounded to the banks
benefit makes it part of the taxable gross receipts in computing
the 5% GRT.
A perusal of these provisions clearly shows that two types of taxes are
involved in the present controversy:
(1) the GRT, which is a percentage tax; and
(2) the FWT, which is an income tax. As a bank, petitioner is covered by
both taxes.
The 5% GRT is included under Title V. Other Percentage Taxes of the Tax
Code and is not subject to withholding. The banks and non-bank
financial intermediaries liable therefor shall, under Section 125(a)(1),[16] file quarterly returns on the amount of gross receipts and pay the taxes
due thereon within twenty (20) days after the end of each taxable quarter.
The 20% FWT, on the other hand, falls under Section 24(e)(1)[19] of Title II.
Tax on Income. It is a tax on passive income, deducted and withheld at
source by the payor-corporation and/or person as withholding agent
pursuant to Section 50,[ and paid in the same manner and subject to the
same conditions as provided for in Section 51.
A percentage tax is a national tax measured by a certain percentage of
the gross selling price or gross value in money of goods sold,
bartered or imported; or of the gross receipts or earnings derived
by any person engaged in the sale of services.[22] It is not subject to
withholding.
An income tax, on the other hand, is a national tax imposed on the net
or the gross income realized in a taxable year.[23] It is subject to
withholding.
ANALYSIS:
Under the Tax Code, the earnings of banks from passive income are
subject to a 20% FWT. This tax is withheld at source and is thus
not actually and physically received by the banks, because it is paid
directly to the government by the entities from which the banks derived
the income. Apart from the 20% FWT, banks are also subject to a five
percent gross receipts tax (5% GRT) which is imposed by the Tax
Code on their gross receipts, including the passive income.
Since the 20% FWT is constructively received by the banks and forms part
of their gross receipts or earnings, it follows that it is subject to the 5%
GRT. After all, the amount withheld is paid to the government on their
behalf, in satisfaction of their withholding taxes. That they do
not actually receive the amount does not alter the fact that it is remitted
for their benefit in satisfaction of their tax obligations.
Stated otherwise, the fact is that if there were no withholding tax
system in place in this country, this 20 percent portion of the
passive income of banks would actually be paid to the banks and
then remitted by them to the government in payment of their
income tax. The institution of the withholding tax system does not alter
the fact that the 20 percent portion of their passive income
constitutes part of their actual earnings, except that it is paid
directly to the government on their behalf in satisfaction of the 20
percent final income tax due on their passive incomes.
Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop Inc., G.R.
No. 150947, [July 15, 2003], 453 PHIL 1043-1059
On 11 March 1991, CIR issued Revenue Memorandum Order (RMO)
No. 15-91 imposing a 5% lending investor's tax on pawnshops.
On 11 September 1997, pursuant to these issuances, the (BIR) issued
Assessment Notice against Lhuillier demanding payment of
deficiency percentage tax in the sum of P3,360,335.11 for 1994
inclusive of interest and surcharges.
On 3 October 1997, Lhuillier filed an administrative protest with the Office
of the Revenue Regional Director contending that
(1) neither the Tax Code nor the VAT Law expressly imposes 5%
percentage tax on the gross income of pawnshops;
(2) pawnshops are different from lending investors, which are
subject to the 5% percentage tax under the specific provision of the Tax
Code;
(3) RMO No. 15-91 is not implementing any provision of the Internal
Revenue laws but is a new and additional tax measure on pawnshops,
which only Congress could enact;
(4) RMO No. 15-91 impliedly amends the Tax Code and is therefore
taxation by implication, which is proscribed by law; and
(5) RMO No. 15-91 is a "class legislation" because it singles out
pawnshops among other lending and financial operations.
ISSUE:
Are pawnshops included in the term lending investors for the purpose of
imposing the 5% percentage tax under then Section 116 of the National
Internal Revenue Code (NIRC) of 1977, as amended by Executive Order
No. 273?
RULING: NO
RMO No. 15-91 and RMC No. 43-91 are hereby declared null and void.
Consequently, Lhuillier is not liable to pay the 5% lending investor's
tax.
While it is true that pawnshops are engaged in the business of lending
money, they are not considered "lending investors" for the
purpose of imposing the 5% percentage taxes for the following
reasons:
First. Pawnshops and lending investors were subjected to different tax
treatments; thus:
(3) Other Fixed Taxes. — The following fixed taxes shall be collected as
follows, the amount stated being for the whole year, when not otherwise
specified:
xxx xxx xxx
(dd) Lending investors —
(ff) Pawnshops, one thousand pesos
Second. Congress never intended pawnshops to be treated in the
same way as lending investors. Both the NIRC of 1986 and the NIRC of
1977 dealt with pawnshops and lending investors differently. Verily then,
it was the intent of Congress to deal with both subjects differently.
Hence, we must likewise interpret the statute to conform with such
legislative intent.
Third. Section 116 of the NIRC of 1977, as amended by E.O. No. 273,
subjects to percentage tax dealers in securities and lending
investors only. There is no mention of pawnshops. Under the
maxim expressio unius est exclusio alterius, the mention of one thing
implies the exclusion of another thing not mentioned.
Fourth. Since Section 116 of the NIRC of 1977, which breathed life on the
questioned administrative issuances, had already been repealed, RMO
15-91 and RMC 43-91, which depended upon it, are deemed
automatically repealed. Hence, even granting that pawnshops are
included within the term lending investors, the assessment from 27 May
1994 onward would have no leg to stand on.
RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as
implementing rules or corrective measures revoking in the process
the previous rulings of past Commissioners. In so doing, the CIR did
not simply interpret the law. The due observance of the
requirements of notice, hearing, and publication should not have
been ignored.
Section 116 of the NIRC, as amended, which provided:
SEC. 116. Percentage tax on dealers in securities; lending investors. —
Dealers in securities and lending investors shall pay a tax equivalent to six
(6) per centum of their gross income. Lending investors shall pay a tax
equivalent to five (5%) percent of their gross income.
It is clear from the aforequoted provision that pawnshops are not
specifically included.
Tambunting Pawnshop, Inc. v. Commissioner of Internal Revenue, G.R. No.
179085, [January 21, 2010], 624 PHIL 507-517)
CIR sent the Tambunting Pawnshop, Inc. (petitioner) an assessment notice
dated January 15, 2003 for
P3,055,564.34 deficiency value-added tax (VAT),
P406,092.50 deficiency documentary stamp tax on pawn tickets,
P67,201.55 deficiency withholding tax on compensation, and
P21,723.75 deficiency expanded withholding tax, all inclusive of
interests and surcharges
for the taxable year 1999.
ISSUE:
1. whether pawnshops are liable to pay VAT
2. won liable to pay DST
RULING:
1. Not liable
Since the imposition of VAT on pawnshops, which are non-bank
financial intermediaries, was deferred for the tax years 1996 to
2002, petitioner is not liable for VAT for the tax year 1999.
From 1996 to 2002 , since petitioner is a non-bank financial
intermediary, it is subject to l0% VAT but deferred by law
Starting January 1, 2003 , with the full implementation of the VAT
system on non-bank financial intermediaries starting, petitioner
is liable for 10% VAT for said tax year.
B eginning 2004 up to the present , by virtue of R.A. No. 9238,
petitioner is no longer liable for VAT but it is subject to
percentage tax on gross receipts from 0% to 5%, as the
case may be.
In First Planters Pawnshop, Inc. v. Commissioner of Internal
Revenue, held:
In fine, prior to the [passage of the] EVAT Law [in 1994], pawnshops were
treated as lending investors subject to lending investor's tax.
Subsequently, under Section 108 (A) of the Tax Code of 1997, as
amended. R.A. No. 9238 [which was passed in 2004 ] finally classified
pawnshops as Other Non-bank Financial Intermediaries .
With the enactment of R.A. No. 9238 in 2004, the services of banks,
non-bank financial intermediaries, finance companies, and other financial
intermediaries not performing quasi-banking functions were specifically
exempted from VAT, 28 and the 0% to 5% percentage tax on gross
receipts on other non-bank financial intermediaries was
reimposed under Section 122 of the Tax Code of 1997.
2. Yes, liable to pay DST; pawn ticket being a pledge
In Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue:
. . . A Documentary Stamp] Tax]is an excise tax on the exercise of a right
or privilege to transfer obligations, rights or properties incident
thereto. . . .
xxx xxx xxx
Pledge is among the privileges, the exercise of which is subject to
DST. A pledge may be defined as an accessory, real and unilateral
contract by virtue of which the debtor or a third person delivers
to the creditor or to a third person movable property as security
for the performance of the principal obligation, upon the fulfillment of
which the thing pledged, with all its accessions and accessories, shall be
returned to the debtor or to the third person. xxxx
Section 3 of the Pawnshop Regulation Act defines a pawn ticket as follows:
"Pawn ticket" is the pawnbrokers' receipt for a pawn. It is neither a
security nor a printed evidence of indebtedness."
True, the law does not consider said ticket as an evidence of security or
indebtedness. However, for purposes of taxation, the same pawn ticket
is proof of an exercise of a taxable privilege of concluding a
contract of pledge. There is therefore no basis in petitioner's assertion
that a DST is literally a tax on a document and that no tax may be
imposed on a pawn ticket.
Documentary Stamp Tax (173-201)As amended by RA 9243 9/14/2015 2:31:00 PM
Philippine Banking Corp. v. Commissioner of Internal Revenue,
G.R. No. 170574, [January 30, 2009], 597 PHIL 363-389
Philippine Banking Corporation, now, Global Business Bank, Inc.,
(petitioner) is a banking institution. For the taxable years 1996 and 1997,
petitioner offered its Special/Super Savings Deposit Account"
(SSDA) to its depositors. The SSDA is a form of a savings deposit
evidenced by a passbook and earning a higher interest rate than a
regular savings account. Petitioner believes that the SSDA is not subject
to Documentary Stamp Tax (DST)
On 10 January 2000, the CIR(respondent) sent petitioner a Final
Assessment Notice assessing deficiency DST based on the
outstanding balances of its SSDA, including increments, in the total
sum of P17,595,488.75 for 1996 and P47,767,756.24 for 1997.
PETITIONER Philippine Banking:
the SSDA is in the nature of a regular savings account.
a passbook, cannot be construed as a certificate of deposit
subject to DST under Section 180 of the 1977 NIRC.
prior to the passage of Republic Act No. 9243 (RA 9243), there
was no law subjecting SSDA to DST during the taxable years
1996 and 1997 admitting that with this new taxing clause, its
SSDA is now subject to DST.
RESPONDENT CIR:
the SSDA is a time deposit account, albeit in the guise of a
regular savings account evidenced by a passbook.
Petitioner's passbook evidencing its SSDA is considered a
certificate of deposit, and being very similar to a time deposit
account, it should be subject to the payment of DST.
ISSUE:
whether petitioner's SSDAs are "certificates of deposits drawing interest"
as used in Section 180 of the 1977 NIRC making it subject to DST?
RULING: YES
SSDA is a certificate of deposit drawing interest subject to DST
even if it is evidenced by a passbook and non-negotiable in character.
The SSDA is for depositors who maintain savings deposits with
substantial average daily balance and which earn higher
interest rates.
The holding period of an SSDA floats at the option of the
depositor at 30, 60, 90, 120 days or more and for maintaining a
longer holding period, the depositor earns higher interest rates.
There is no pre-termination of accounts in an SSDA because
the account is simply reverted to an ordinary savings status in
case of early or partial withdrawal or if the required holding
period is not met.
Based on the foregoing, the SSDA has all of the distinct features of a
certificate of deposit.
In International Exchange Bank v. Commissioner of Internal Revenue, this
Court categorically ruled that a passbook representing an interest
earning deposit account issued by a bank qualifies as a certificate
of deposit drawing interest and should be subject to DST. The Court
added that "a document to be deemed a certificate of deposit requires no
specific form as long as there is some written memorandum that the
bank accepted a deposit of a sum of money from a depositor."
DST is imposed on Certificates of Deposits Bearing Interest
including a special savings account evidenced by a passbook.
In Far East Bank and Trust Company v. Querimit, the Court defined a
certificate of deposit is also defined as "a receipt issued by a bank for an
interest-bearing time deposit coming due at a specified future
date."
NOTE: In this case, although it was ruled that SSDA is subject to DST, the
petitioner was adjudged not to pay DST since it was able to comply with
the Tax Amnesty requirement.
ANALYSIS:
Documentary stamp tax is a tax on documents, instruments, loan
agreements, and papers evidencing the acceptance, assignment,
sale or transfer of an obligation, right or property incident thereto. A
DST is actually an excise tax because it is imposed on the
transaction rather than on the document. A DST is also levied on the
exercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legal relationships through the
execution of specific instruments. Hence, in imposing the DST, the Court
considers not only the document but also the nature and
character of the transaction.
FORT BONIFACIO DEVELOPMENT CORPORATION vs. CIR
G.R. Nos. 164155 & 175543. February 25, 2013
In 1992 Congress enacted RA 7227 creating the Bases Conversion
Development Authority (BCDA) for the purpose of raising funds
through the sale to private investors of military camps located in
bustling Metro Manila.
on February 3, 1995 the BCDA established the Fort Bonifacio to Fort
Bonifacio Development Corporation (FBDC) for the purpose of
enabling it to develop a 440-hectare area in Fort Bonifacio, Taguig
City, for mixed residential, commercial, business, institutional,
recreational, tourism, and other purposes. At the time of its incorporation,
FBDC was a wholly-owned subsidiary of BCDA.
On February 7, 1995 the Republic of the Philippines transferred by
land grant to FBDC, through Special Patent 3596, a 214-hectare
land in Fort Bonifacio. FBDC in turn executed a Promissory Note for
P71.2 billion plus in favor of the Republic.
On February 8, 1995 the Republic executed a Deed of Absolute Sale
with Quitclaim in favor of FBDC covering the same 214-hectare land
also for P71.2 billion.
On February 24, 1995, within the same month of the issuance of the
Special Patent and the execution of the deed of absolute sale, Congress
enacted R.A. 7917, declaring exempt from all forms of taxes the
proceeds of the Government sale of the Fort Bonifacio land.
On December 10, 1999 the Commissioner issued a Final Assessment
Notice to FBDC for deficiency documentary stamp tax of
P1,068,412,560.00 based on the Republic's 1995 sale to it of the Fort
Bonifacio land.
PETITIONER FBDC:
invoking R.A. 7917, which exempted the proceeds of the sale
of the Fort Bonifacio land from all forms of taxes.
During the pendency of these petitions or on December 17, 2004 the
FBDC filed a manifestation and motion informing the Court that the
disputed assessment had already been paid through a Special
Allotment Release Order issued by the Department of Budget and
Management (DBM) to BCDA for P1,189,121,947.00.
CTA:
while the Special Patent that the Republic issued to FBDC was exempt
from the payment of DST, the Deed of Absolute Sale that the
Republic subsequently executed in FBDC's favor covering the
same land is NOT EXEMPT
ISSUES:
1. Whether or not FBDC was liable for the payment of the DST and a 20%
delinquency interest on the Deed of Absolute Sale of the 214-hectare
Fort Bonifacio land that the Republic executed in FBDC's favor; and
2. Whether or not the case is already moot and academic by the fact of
payment of the DST assessment by BCDA.
RULING:
1. NO
The sale of Fort Bonifacio land was not a privilege but an obligation
imposed by law which was to sell lands in order to fulfill a public
purpose. To charge DST on a transaction which was basically a
compliance with a legislative mandate would go against its very nature as
an excise tax.
Republic's subsequent execution of a Deed of Absolute Sale cannot be
regarded as a separate transaction subject to the payment of
DST. The Republic's sale of the land to FBDC under the Special Patent was
a complete and valid sale that conveyed ownership of the land to the
buyer.
In acknowledging that the Republic "has issued . . . a Special Patent which
will absolutely and irrevocably grant and convey" the legal title over the
land to FBDC, the Republic in effect admitted that the Deed of Absolute
Sale was only a formality, not a vehicle for conveying ownership,
that it thought essential for the issuance of an Original Certificate of Title
(OCT) covering the land.
2. No longer ruled upon
It would be useless to resolve the further issue of whether or not the
case has been rendered moot and academic by BCDA's payment of the
DST assessment.
ANALYSIS:
DST is by nature, an excise tax since it is levied on the exercise by
persons of privileges conferred by law. These privileges may cover
the creation, modification or termination of contractual
relationships by executing specific documents like deeds of sale,
mortgages, pledges, trust and issuance of shares of stock.
Commissioner of Internal Revenue v. First Express Pawnshop Co., Inc.,
G.R. Nos. 172045-46, [June 16, 2009], 607 PHIL 227-251
Petitioner CIR issued assessment notices against First Express
Pawnshop Company, Inc. (respondent):
RESPONDENT FIRST EXPRESS PAWNSHOP:
no deficiency DST was due because Section 180 of theNational Internal
Revenue Code (Tax Code) does not cover any document or
transaction which relates to respondent.
PETITIONER CIR:
also cited BIR Ruling No. 221-91 which provides that pawnshop tickets
are subject to DST.
ISSUE: WON respondent is liable to pay P12,328.45 as DST on “deposit
on subscription of capital stock”
RULING:
NO
The deposit on stock subscription as reflected in respondent's Balance
Sheet as of 1998 is not a subscription agreement subject to the
payment of DST. There is no P800,000 worth of subscribed capital stock
that is reflected in respondent's GIS. The deposit on stock subscription
is merely an amount of money received by a corporation with a
view of applying the same as payment for additional issuance of
shares in the future, an event which may or may not happen.
The person making a deposit on stock subscription does not have
the standing of a stockholder and he is not entitled to dividends,
voting rights or other prerogatives and attributes of a stockholder. Hence,
respondent is not liable for the payment of DST on its deposit on
subscription for the reason that there is yet no subscription that
creates rights and obligations between the subscriber and the
corporation.
In Section 175 of the Tax Code, DST is imposed on the original issue of
shares of stock. The DST, as an excise tax, is levied upon the privilege,
the opportunity and the facility of issuing shares of stock.
In Section 176 of the Tax Code, DST is imposed on the sales,
agreements to sell, memoranda of sales, deliveries or transfer of
shares or certificates of stock in any association, company, or
corporation, or transfer of such securities by assignment in blank, or by
delivery, or by any paper or agreement, or memorandum or other
evidences of transfer or sale whether entitling the holder in any manner to
the benefit of such certificates of stock, or to secure the future payment of
money, or for the future transfer of certificates of stock.
ANALYSIS:
DST is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation,
right or property incident thereto. DST is actually an excise tax
because it is imposed on the transaction rather than on the
document. DST is also levied on the exercise by persons of certain
privileges conferred by law for the creation, revision, or termination of
specific legal relationships through the execution of specific instruments.
CIR vs. MANILA BANKERS' LIFE INSURANCE CORPORATION
[G.R. No. 169103. March 16, 2011.]
Respondent Manila Bankers' Life Insurance Corporation is
engaged in the life insurance business.
On December 14, 1999, petitioner issued a Preliminary Assessment
Notice against the respondent for the year 1997.
The respondent agreed to all the assessments issued against it except to
the amount of P2,351,680.90 representing deficiency documentary
stamp taxes on its policy premiums and penalties.
The tax deficiency was computed by including the increases in the life
insurance coverage or the sum assured by some of respondent's
life insurance plans.
The amount of P818,919,000.00 comprises the increases in the sum
assured for the respondent's ordinary insurance —
the "Money Plus Plan" (P74,755,000.00), and
group insurance (P744,164,000.00).
PETITIONER CIR:
Under the Money Plus Plan, since the documentary stamp tax
was affixed on the policy based only on the first period
premiums, then the succeeding premium payments should
likewise be subject to documentary stamp tax.
In the case of respondent's group insurance, petitioner concluded
that any additional member to the group of employees
should similarly be subjected to documentary stamp tax.
ISSUE:
WON imposition of documentary stamp tax on increases in the coverage
or sum assured by existing life insurance policies, even without the
issuance of new policies is valid
RULING:
On Documentary Stamp Tax on the "Money Plus Plan": No but
because it renewed the policy
The availment of the option in the guaranteed continuity clause will
effectively renew the Money Plus Plan policy, which is indisputably
subject to the imposition of documentary stamp tax under Section 183 as
an insurance renewed upon the life of the insured.
The increase in the life insurance coverage was only corollary to
the new premium rate imposed based upon the insured's age at the
time the continuity clause was availed of. It was not automatic, was never
guaranteed, and was certainly neither definite nor determinable at the
time the policy was issued.
Therefore, the increases in the sum assured brought about by the
guaranteed continuity clause cannot be subject to documentary
stamp tax under Section 183 as insurance made upon the lives of
the insured.
However, it is clear from the text of the guaranteed continuity clause that
what the respondent was actually offering in its Money Plus Plan
was the option to renew the policy, after the expiration of its original
term. Consequently, the acceptance of this offer would give rise to the
renewal of the original policy.
Although the two cases(Lincoln) are similar in many ways, they must be
distinguished by the nature of the respective "clauses" in the life
insurance policies involved, where we note a major difference. In Lincoln,
the relevant clause is the "Automatic Increase Clause" which provided
for the automatic increase in the amount of life insurance coverage upon
the attainment of a certain age by the insured, without any need for
another contract. In the case at bar, the clause in contention is the
"Guaranteed Continuity Clause" in respondent's Money Plus Plan.
A simple reading of respondent's guaranteed continuity clause will
show that it is significantly different from the "automatic increase
clause" in Lincoln. The only things guaranteed in the respondent's
continuity clause were: the continuity of the policy until the stated expiry
date as long as the premiums were paid within the allowed time;
On Documentary Stamp Tax on Group Life Insurance: No but an
insurance is made
Everytime the respondent registers and attaches an Enrollment Card to an
existing master policy, it exercises its privilege to conduct its business of
insurance and this is patently subject to documentary stamp tax as
insurance made upon a life under Section 183.
In the case of a company group insurance plan, the premiums paid on the
issuance of the master policy cover only those employees enrolled at the
time such master policy was issued. When the employer hires additional
employees during the life of the policy, the additional employees may
be covered by the same group insurance already taken out
without any need for the issuance of a new policy.
Whenever a master policy admits of another member, another life is
insured and covered. This means that the respondent, by approving the
addition of another member to its existing master policy, is once more
exercising its privilege to conduct the business of insurance, because it is
yet again insuring a life.
IN CONCLUSION:
This Court would like to make it clear that the assessment for deficiency
documentary stamp tax is being upheld NOT because the additional
premium payments or an agreement to change the sum assured during
the effectivity of an insurance plan are subject to documentary stamp tax,
but because documentary stamp tax is levied on every document
which establishes that insurance was made or renewed upon a
life.
ANALYSIS:
This Court ruled that the increase in the sum assured brought about by
the "automatic increase" clause incorporated in Lincoln's Junior
Estate Builder Policy was still subject to documentary stamp tax,
notwithstanding that no new policy was issued, because the date of the
effectivity of the increase, as well as its amount, were already definite
and determinable at the time the policy was issued. As such, the
tax base under Section 183, which is "the amount fixed in the policy," is
"the figure written on its face and whatever increases will take effect in
the future by reason of the 'automatic increase clause. '" This Court added
that the automatic increase clause was "in the nature of a conditional
obligation under Article 1181, by which the increase of the insurance
coverage shall depend upon the happening of the event which constitutes
the obligation."
Documentary stamp tax is levied on the exercise of certain
privileges granted by law for the creation, revision, or termination of
specific legal relationships through the execution of specific instruments.
Examples of these privileges, the exercise of which are subject to
documentary stamp tax, are leases of lands, mortgages, pledges, trusts
and conveyances of real property. Documentary stamp tax is thus
imposed on the exercise of these privileges through the execution
of specific instruments, independently of the legal status of the
transactions giving rise thereto. The documentary stamp tax must be
paid upon the issuance of these instruments, without regard to
whether the contracts which gave rise to them are rescissible,
void, voidable, or unenforceable.
H. TAMBUNTING PAWNSHOP, INC. vs CIR
G.R. No. 171138, April 7, 2009
A Pre-Assessment Notice issued by the CIR (CIR) against H.
Tambunting Pawnshop, Inc. (Tambunting) for, among others,
deficiency documentary stamp tax (DST) of P50,910.
Petitioner TAMBUNTING:
further contends that the DST is imposed on the documents issued, not
the transactions so had or accomplished. It insists that the document to
be taxed under the transaction contemplated should be the pledge
agreement, if any is issued, not the pawn ticket.
Respondent CIR:
further argues that the pawn ticket is the pledge contract itself and
thus, it is subject to documentary stamp tax.
ISSUE:
WON Tambunting liable for documentary stamp taxes based on the pawn
tickets that it issued
RULING: YES
The law imposes DST on documents issued in respect of the
specified transactions, such as pledge, and not only on papers
evidencing indebtedness. Therefore, a pawn ticket, being issued in
respect of a pledge transaction, is subject to documentary stamp
tax.
True, the pawn ticket is neither a security nor a printed evidence of
indebtedness. But, precisely being a receipt for a pawn, it documents
the pledge.
A pledge is an accessory, real and unilateral contract by virtue of
which the debtor or a third person delivers to the creditor or to a
third person movable property as security for the performance of the
principal obligation, upon fulfillment of which the thing pledged, with all
its accessions and accessories, shall be returned to the debtor or to the
third person. The pawn ticket is required to contain the same
essential information that would be found in a pledge
agreement. Only the nomenclature of the requirements in the pawn
ticket is changed to refer to the specific kind of pledge transactions
undertaken by pawnshops. The property or thing pledged is referred
to as the pawn, the creditor (pledgee) is referred to as the pawneeand
the debtor (pledgor) is referred to as the pawner.
ANALYSIS:
SEC. 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments
and Papers. Upon documents, instruments, loan agreements and
papers, and upon acceptances, assignments, sales and transfers
of the obligation, right or property incident thereto, there shall be
levied, collected and paid for, and in respect of the transaction so
had or accomplished, the corresponding documentary stamp taxes
prescribed in the following Sections (Emphasis supplied.)
SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. On
every mortgage or pledge of lands, estate, or property, real or personal,
heritable or movable, whatsoever, where the same shall be made as a
security for the payment of any definite and certain sum of money lent at
the time or previously due and owing or forborne to be paid, being
payable, and on any conveyance of land, estate, or property whatsoever,
in trust or to be sold, or otherwise converted into money which shall be
and intended only as security, either by express stipulation or
otherwise, there shall be collected a documentary stamp tax
CIR vs LINCOLN PHILIPPINE LIFE INSURANCE COMPANY
[G.R. No. 119176. March 19, 2002]
RESPONDENT Lincoln Philippine Life Insurance Co., Inc., (now
Jardine-CMA Life Insurance Company, Inc.) is engaged in life insurance
business. In the years prior to 1984, private respondent issued a special
kind of life insurance policy known as the Junior Estate Builder Policy,
the distinguishing feature of which is a clause providing for an
automatic increase in the amount of life insurance coverage upon
attainment of a certain age by the insured without the need of
issuing a new policy. Documentary stamp taxes due on the policy were
paid by petitioner only on the initial sum assured.
Subsequently, petitioner issued deficiency documentary stamps tax
assessment for the year 1984 in the amounts of (a) P464,898.75,
corresponding to the amount of automatic increase of the sum
assured on the policy issued by respondent,
ISSUE: WON Lincoln is liable to pay the deficiency of DST when it did not
include the amount of the automatic increase of the sum assured?
RULING: YES
Although the automatic increase in the amount of life insurance coverage
was to take effect later on, the date of its effectivity, as well as the
amount of the increase, was already definite at the time of the
issuance of the policy. Thus, the amount insured by the policy at the
time of its issuance necessarily included the additional sum covered by
the automatic increase clause because it was already determinable at
the time the transaction was entered into and formed part of the
policy.
From Section 173 that the payment of documentary stamp taxes is
done at the time the act is done or transaction had and the tax
base for the computation of documentary stamp taxes on life insurance
policies under Section 183 is the amount fixed in policy, unless the
interest of a person insured is susceptible of exact pecuniary
measurement.[7] What then is the amount fixed in the policy? Logically, we
believe that the amount fixed in the policy is the figure written on
its face and whatever increases will take effect in the future by
reason of the automatic increase clause embodied in the policy
without the need of another contract.
INTERNATIONAL EXCHANGE BANK vs CIR
G.R. No. 171266, April 4, 2007
On January 6, 2000, petitioner was personally served with an
undated Pre-Assessment Notice (PAN) assessing it of deficiency
on its purchases of securities from the Bangko Sentral ng Pilipinas or
Government Securities Purchased-Reverse Repurchase Agreement (RRPA)
and its FSD for the taxable years 1996 and 1997.
On January 12, 2000, petitioner received a Formal Assessment
Notice (FAN) for deficiency DST on its RRPA and FSD, including
surcharges, in the amounts of P25,180,492.15 for 1996
and P75,383,751.55 for 1997, and an accompanying demand
letter requesting payment thereof within 30 days.
PETITIONER INT’L EXCHANGE BANK:
It cannot be considered a certificate of deposit subject to
DST under Section 180 of the Tax Code for, unlike a certificate of
deposit which is a negotiable instrument, the passbook it
issued for its FSD was not payable to the order of the depositor
or to some other person as the deposit could only be withdrawn
by the depositor or by a duly authorized representative.
Regular savings account not subject to tax
ISSUE:
Is a Savings Account-Fixed Savings Deposit (FSD) evidenced by a
passbook issued by International Exchange Bank (petitioner) subject to
documentary stamp tax (DST) for the years 1996 and 1997
RULING: YES
The FSD, like a time deposit, provides for a higher interest rate when
the deposit is not withdrawn within the required fixed period; otherwise, it
earns interest pertaining to a regular savings deposit. Having a fixed
term and the reduction of interest rates in case of pre-
termination are essential features of a time deposit.
A regular savings account with a passbook which is withdrawable at
any time is NOT subject to DST, unlike a time deposit which is payable
on a fixed maturity date and subject to DST.
A passbook representing an interest earning deposit account issued
by a bank qualifies as a certificate of deposit drawing interest.
A document to be deemed a certificate of deposit requires no specific
form as long as there is some written memorandum that the bank
accepted a deposit of a sum of money from a depositor. What is
important and controlling is the nature or meaning conveyed by the
passbook and not the particular label or nomenclature attached to it,
inasmuch as substance, not form, is paramount.
A certificate of deposit may or may not be negotiable as gathered
from the use of the conjunction or, instead of and, in its definition. A
certificate of deposit may be payable to the depositor, to the order of the
depositor, or to some other person or his order.
If at all, the further amendment was intended to eliminate precisely
the scheme used by banks of issuing passbooks to cloak its time
deposits as regular savings deposits.
ANALYSIS:
Section 180 of the Tax Code, as amended by R.A. 7660, which reads:
SEC. 180. Stamp tax on all loan agreements, promissory notes, bills of
exchange, drafts, instruments and securities issued by the government or
any of its instrumentalities, certificates of deposit bearing interest and
others not payable on sight or demand. - On all loan agreements signed
abroad wherein the object of the contract is located or used in the
Philippines; bills of exchange (between points within the Philippines),
drafts, instruments and securities issued by the Government or any of its
instrumentalities or certificates of deposits drawing interest, or
orders for the payment of any sum of money otherwise than at sight or on
demand, or on all promissory notes, whether negotiable or non-
negotiable, except bank notes issued for circulation, and on each renewal
of any such note,
PHILIPPINE HEALTH CARE PROVIDERS, INC. vs CIR
G.R. No. 167330, June 12, 2008
Petitioner is a domestic corporation whose primary purpose is [t]o
establish, maintain, conduct and operate a prepaid group practice
health care delivery system or a health maintenance organization
to take care of the sick and disabled persons enrolled in the health care
plan.
On January 27, 2000, respondent CIR sent petitioner a formal demand
letter and the corresponding assessment notices demanding the payment
of deficiency taxes.
The deficiency DST assessment was imposed on petitioners health
care agreement with the members of its health care program pursuant
to Section 185 of the 1997 Tax Code
PETITIONER Philippine Healthcare:
its health care agreement is not a contract of insurance but a
contract for the provision on a prepaid basis of medical services,
including medical check-up, that are not based on loss or
damage.
It is a health maintenance organization regulated by the
Department of Health, not an insurance company under
the jurisdiction of the Insurance Commission.
For these reasons, petitioner asserts that the health care
agreement is not subject to DST.
ISSUE:
Is a health care agreement in the nature of an insurance contract and
therefore subject to the documentary stamp tax (DST) imposed under
Section 185 of Republic Act 8424 (Tax Code of 1997)?
RULING: Yes, a non-life insurance policy thus subject to DST
Petitioners health care agreement is primarily a contract of indemnity.
And in the recent case of Blue Cross Healthcare, Inc. v. Olivares, this Court
ruled that a health care agreement is in the nature of a non-life
insurance policy.
Petitioner assumes the risk of paying for the costs of the services even if
they are significantly and substantially more than what the member has
prepaid. Petitioner does not bear the costs alone but distributes or
spreads them out among a large group of persons bearing a
similar risk, that is, among all the other members of the health care
program. This is insurance.
Moreover, DST is not a tax on the business transacted but an
excise on the privilege, opportunity, or facility offered at exchanges
for the transaction of the business. It is an excise on the facilities
used in the transaction of the business, separate and apart from the
business itself.
In particular, the DST under Section 185 of the 1997 Tax Code is
imposed on the privilege of making or renewing any policy of
insurance (except life, marine, inland and fire insurance), bond or
obligation in the nature of indemnity for loss, damage, or liability.
ANALYSIS:
It is also incorrect to say that the health care agreement is not based on
loss or damage because, under the said agreement, petitioner assumes
the liability and indemnifies its member for hospital, medical and
related expenses (such as professional fees of physicians). The term
loss or damage is broad enough to cover the monetary expense or
liability a member will incur in case of illness or injury.
Under the health care agreement, the rendition of hospital, medical
and professional services to the member in case of sickness, injury or
emergency or his availment of so-called out-patient services is the
contingent event which gives rise to liability on the part of the
member.
The insurable interest of every member of petitioners health care
program in obtaining the health care agreement is his own health.
Under the agreement, petitioner is bound to indemnify any member
who incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingency to the extent agreed upon
under the contract.
MICHEL J. LHUILLIER PAWNSHOP, INC vs CIR (RESOLUTION)
G.R. No. 166786, September 11, 2006
This resolves petitioners motion for reconsideration of the May 3, 2006
Decision of the Court holding that contracts of pledge entered into by
pawnshops are subject to (DST). We ruled therein that DST is
essentially an excise tax; it is not an imposition on the document itself but
on the privilege to enter into a taxable transaction of pledge.
The gist of the motion for reconsideration:
it is indispensable that the transaction must be embodied in
and evidenced by a document. Since a pawn ticket as defined
in (P.D.) No. 114 or the Pawnshop Regulation Act is merely the
pawnbrokers receipt for a pawn and not a security nor a
printed evidence of indebtedness.
it cannot be made to pay surcharges and interest because
it acted in good faith and the confusion as to whether it is liable
to pay DST is partly attributable to the divergent rulings of the
Bureau of Internal Revenue (BIR) on the matter.
ISSUES:
1. WON liable for DST
2. WON liable for interest and surcharge?
RULING:
1. YES
The entries contained in a pawnshop ticket spell out a contract of
pledge and that the exercise of the privilege to conclude such a contract
is taxable under Section 195 of the NIRC.
Section 195 of the National Internal Revenue Code (NIRC) imposes a DST
on every pledge regardless of whether the same is a conventional
pledge governed by the Civil Code or one that is governed by the
provisions of P.D. No. 114. All pledges are subject to DST, unless
there is a law exempting them in clear and categorical language.
For purposes of Section 195, pawnshop tickets need not be an
evidence of indebtedness nor a debt instrument because it taxes
the same as a pledge instrument. Neither should the definition of
pawnshop ticket, as not a security, exempt it from the imposition of
DST. It was correctly defined as such because the ticket itself is not the
security but the pawn or the personal property pledged to the
pawnbroker.
Moreover, it should be pointed out that the provisions of the NIRC on DST
has recently been amended by R.A. No. 9243. Among the highlights
thereof were the amendments to Section 199,[ which incorporated 12
more categories of documents in addition to the initial two categories
exempted from DST. As stated in our May 3, 2006 Decision, pawnshop
tickets is not one of them. Expressio unious est exclusion
alterius. The omission of pawnshop tickets only means that it is
not among the documents exempted from DST.
2. Not
Good faith and honest belief that one is not subject to tax on the basis
of previous interpretation of government agencies tasked to implement
the tax law, are sufficient justification to delete the imposition of
surcharges and interest.