That Thing Called Documentary Stamp Tax

Congratulations, you are almost a few steps away from becoming a legal owner of your dream property. But wait, something’s missing—that thing called documentary stamp tax.

Before you scream out all your frustration, save yourself from heartbreak and check out what this red little box means to you and your real property.

What is a Documentary Stamp Tax DST?

Simply put, the documentary stamp tax is a tax on documents, instruments, loan agreements, and papers that signify the official transactions between one party to another. It involves transactions made, signed, issued, accepted, or transferred of an obligation right or property incident thereto.

We all know the importance of official and legal documents in today's world. If it does not contain a documentary stamp of sorts, the government and other parties, such as offices that offer loan agreements, may not consider your transaction.

Having an official documentary stamp also signifies that the document you possess came from its original issuance. With the government usually the principal Philippine source of loose documentary stamps, the documentary stamp tax became an integral part of the debt instruments used by the Bureau of Internal Revenue under the National Internal Revenue Code.

Other forms of taxable documents that such act would apply but are not limited to are the following: Deed of Sale, Bank Checks, Debt Instrument, Original Issuance of Stocks, Birth Certificate, Power of Attorney, DTI Business Name Certificate, Lotto, Leases, and other Hiring Agreements. In this case, we will focus on those that concern documentary stamp tax compliance of transferring documents for real property.

Who Shall File the Documentary Stamp Tax?

Similar to any government transactions concerning taxes, a BIR form must be fulfilled in triplicate and the following transactions.

For most business contracting parties, the Documentary Stamp Tax shall be filed in triplicate by the following person signing, making, accepting, issuing, or transferring the document or facility which needs the evidence of their transactions.

Such transactions may be between business owners and prospective buyers of real property who will then become the new taxpayers.

On the other hand, a stamp tax can also be issued by a metering machine user that imprints the documentary stamp tax due on the taxable document.

There are also instances when a revenue collection agent for remittance of sold loose documentary stamps can also file or issue the said tax compliance documents.

However, on some occasions, if a transaction involves an international investor from foreign countries, they will have to obtain a Tax Identification Number or TIN for the transaction. This ensures that the details of the transaction and the DST filing can be filed and recorded correctly with the BIR. 

If one party to the taxable document is exempted from the tax imposed, the other party who is not exempted will be the one directly liable for the tax.

EXEMPTION FROM PAYING DOCUMENTARY STAMP TAX

Who and what are exempt from paying the said tax? There can be two types of those who may not pay for the said documentary stamp tax.

According to the Section 9 of Revenue Regulations No. 13-2004, these documents are exempt from paying the DST:

a. Certificate of oaths done in official capacity

b. Affidavits of poor persons to prove poverty

c. Certificates of the assessed value of lands with value not exceeding P200 as determined by the government treasurer to applicants of land title registration

d. Sale or exchange of shares of stock traded via the local stock exchange as mentioned in R.A 9648

e. Transfer of any policy of insurance, mortgage, lease, or the continuance or renewal of any contract, agreement, charter, or any evidence of obligation or indebtedness issued, if there is no change in the remaining period of coverage or maturity date or from that of the original instrument.

f. Transfer of property under Section 40 C2 of the National Internal Revenue Code of 1997, as amended

g. National, provincial, city, or municipal governments papers and documents filed in court by or for the

h. Other insurance policies are made or granted by a fraternal or beneficiary society, order, association, or cooperative company and must be not for profit.

Where and When Should You File and Pay Documentary Stamp Tax (DST)?

The BIR form and return shall be filed and the tax paid to the Authorized Agent Bank (AAB) within the Revenue District Office (RDO) territorial jurisdiction where the transferor or seller is required for registration or where the property is located in case of sale of real property.

Your filing date is within five (5) days after the close of the month when the taxable document was signed, made, issued, accepted, or transferred.

PAYMENT SYSTEM AND SIMILAR INSTRUMENTS

There are also two payment systems you can choose from. Certain taxpayers are required or choose to file returns via the Electronic Documentary Stamp Tax System of the BIR, or the eDST. Through an online system, a secured digital stamp will be imprinted on the taxable document showing that the DST has been paid. A guideline and basis for the eDST system can be found in Revenue Regulations No.7-2009.

Aside from manual transactions, another payment system that a transaction can be made through is the electronic filing and payment system (eFPS), another online electronic filing system from the BIR.

MANDATORY DOCUMENTARY REQUIREMENTS

1. Photocopy of the document where the documentary stamp shall be affixed

2. If applicable, proof of exemption under special laws; and

3. If applicable, proof of payment of the documentary stamp tax paid upon the original issue of the stock

TRANSFER METHODS

A payment transfer can be made via e-payment channels of Authorized Agent Banks or online facilities, credit/debit/prepaid cards, and mobile payments.

You can pay via cash if your transaction is under twenty thousand pesos (P 20,000.00). If your payment is above twenty thousand pesos (P 20,000.00), your payment must be made through Cashier's Check or Manager's Check to the Revenue Collection Officer of the RDO concerned.

How to Compute Documentary Stamp Tax on Sale of Real Property in the Philippines?

For specific transactions involving sale, delivery, or transfer of stock or property, as per the law, there is a documentary stamp tax of one peso and fifty centavos (Php 1.50) for every two hundred pesos (Php 200) or fractional part of the par value of such property. In the case of a stock that does not have a par value, the amount of documentary stamp tax will be equivalent to fifty percent (50%) of the DST applicable upon the original issuance of the said stock.

Per the Tax Rate Guidelines set by the BIR, Real Property Documentary Stamp Taxes can be one-time transactions based on DST rates applicable to a transaction. For a quick reference of tax rates as applied to real estate, we have sorted out the following information from the complete table.

Tax Code Section: 177

Document: Certificate of Profits or Interest in Property or Accumulation

Taxable Unit: P200.00 or fraction thereof

Tax Due Per Unit: 1.00

% of Unit: .5%

Taxable Base: Face value of such certificates/memorandum

Tax Code Section: 194

Document: Leases and other Hiring agreements or memorandum or contract for hire, use or rent of any lands or tenements or portions thereof

Taxable Unit: First 2,000 or fractional part thereof

For every P1,000 or fractional part thereof over the first P2,000 for each year of the term of the said contract or agreement

Tax Due Per Unit:  6.00 / 2.00

% of Unit: .3% /.2% 

Taxable Base : 

Tax Code Section: 195

Document: Mortgage or Pledge of lands, estate, or property and Deeds of Trust

Taxable Unit: First 5,000  

On each P5,000 or fractional part thereof in excess of 5,000

Tax Due Per Unit:  40.00 / 20.00

% of Unit: .8% / .4%

Taxable Base : Amount Secured / Amount Secured

Tax Code Section: 196

Document: Deed of Sale, Conveyances, Donations of Real Property (except grants, patents or original certificate of adjudication issued by the government)

Taxable Unit:  First 1,000         

For each additional P1,000 or fractional part thereof over P1,000

Tax Due Per Unit:   15.00/ 15.00

% of Unit: 1.5% / 1.5%

Taxable Base: Consideration or Fair Market Value, whichever is higher (if the government is a party, the 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)

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