Documentary Stamp Tax in the Philippines: What Triggers It and Who Pays

The documentary stamp tax (DST) is a tax imposed on documents, instruments, loan agreements, and papers that evidence the transfer of an obligation, right, or property, or that show the acceptance or assignment of a right. It is not a tax on the transaction's profit — it is a tax on the document itself. The Bureau of Internal Revenue (BIR) collects it, and the taxpayer is generally the person who makes, signs, issues, accepts, or transfers the document. Over the years, the DST system has contributed an increasingly significant volume of internal revenues to the BIR's collection performance.

What the documentary stamp tax covers

The DST applies to a defined set of taxable documents. Common examples include:

• Debt instruments, such as loan agreements and promissory notes;
• Certificates of deposit and time deposits, which bear interest;
• Shares of stock, including original issues and sales or transfers of shares;
• Deeds of sale and other conveyances of real property;
• Leases of real or personal property; and
• Insurance policies and related documents.

The tax is computed based on the face value, consideration, or other tax base stated in the document, depending on the type of instrument. Different documents carry different rates and tax bases, which is why the BIR assigns an Alphanumeric Tax Code (ATC) to each category of DST transaction.

Who is liable to pay

The person liable depends on the document. In general, the DST is payable by the person who makes, signs, issues, accepts, or transfers the taxable document. For example, on a loan agreement, the borrower who signs the instrument is typically the one liable. On an issue of shares, the corporation issuing the shares is liable.

Because the DST attaches to the document, the tax must be paid and the stamp affixed before or at the time the document is issued, accepted, or transferred. A document that requires DST but has none affixed may not be admitted as evidence in court and may expose the parties to penalties.

How the tax is paid and stamped

Historically, taxpayers paid DST by purchasing documentary stamps and affixing them to the document, or by using a Documentary Stamp Electronic Imprinting Machine (DSEIM). The DSEIM is an electronic device that imprints the value of the DST paid, as well as other pertinent data, on the face of the taxable document, and has a remote loading and resetting feature.

The BIR has since moved to the eDST System, a web-based application that provides an on-line mechanism through which taxpayers can utilize and imprint secured documentary stamps on taxable documents using a prescribed laser printer. The eDST System may be accessed on the BIR Website. It requires only a personal computer, a 1200-dpi laser printer, and an Internet connection, and allows a taxpayer to imprint an amount ranging from P0.01 to P999,999,999.99 per affixture.

Enrolling in the eDST System

A taxpayer can enroll in the eDST System by submitting the following documents to the Collection Programs Division (CPD):

1. A Letter of Intent, stating the name of the designated Account Owner, and his or her e-mail address and contact number;
2. A Board Resolution authorizing the designated Account Owner;
3. A photocopy of the Company or Corporation's Certificate of Registration (BIR Form No. 2303); and
4. A photocopy of the Account Owner's Company Identification Card.

After pre-verification and on-line enrollment, approval of the application shall be granted within three (3) working days. An Account Owner is a taxpayer who has successfully enrolled in the eDST System and who is responsible for maintaining the company's DST account balance and for creating Branch Users. A Branch User is a branch, department, or unit authorized by the Account Owner to utilize DST on behalf of the company.

Keeping records of DST transactions

The eDST System requires taxpayers to upload a Reference File — the list of DST utilizations of an eDST Branch User. For taxpayers using the DSEIM machine, the Reference File refers to the proof list, transaction list, premium register, or any equivalent document where daily DST transactions are listed. The Reference File uses the Comma Separated Value (CSV) format and must include details such as the taxpayer identification number, company name, and tax base. The Reference File can be attached to the System at any day within the month of the transaction date, or until the 5th day following the close of that month.

The eDST System automatically computes the DST due on a per-line basis, which is why taxpayers with time deposits of different maturity dates must provide the specific terms of each deposit in number of days.

Frequently asked questions

Is documentary stamp tax the same as income tax? No. DST is a tax on the document or instrument, while income tax is a tax on income or profit. A single transaction may give rise to both.

Who pays the documentary stamp tax on a loan? Generally, the party who makes, signs, issues, accepts, or transfers the taxable document is liable. For a loan agreement, this is typically the borrower who signs the instrument.

What happens if DST is not paid? The document may not be admitted as evidence, and penalties for late affixture may be imposed. The BIR may also consider the taxpayer for audit investigation.

Practical takeaways

• DST is a tax on documents, not on income — it is triggered by instruments that transfer obligations, rights, or property.
• The person who makes, signs, issues, accepts, or transfers the document is generally liable.
• The tax must be paid and the stamp affixed at or before the time the document is issued or accepted.
• Taxpayers with high DST volumes may enroll in the BIR's eDST System to imprint stamps electronically.
• A Reference File listing DST utilizations must be uploaded to the eDST System within the prescribed period.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

RMC No. 51-2010 — Provides basic questions and answers to clarify the issues in the implementation of the Electronic Documentary Stamps Tax System Digest | Full TextOpen in Law LibraryDownload PDF

RR No. 16-2005 — Prescribes the Consolidated Value-Added Tax Regulations of 2005 superseding RR No. 14-2005 (Published in Manila Times on Oct. 21, 2005) Digest | Full TextOpen in Law LibraryDownload PDF

• REPUBLIC ACT NO. 10963 - AN ACT AMENDING SECTIONS 5,6, 24,25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107,108,109,110,112,114,116,127,12S, 129, 145, 148,149,151,155,171,174,175,177,178,179,180, 181, 182, 183,186,188,189,190,191,192, 193,194,195, 196, 197,232, 236,237,249, 254, 264,269, AND 288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING SECTIONS 35,62, AND 89; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.