Stamp tax on loans

Is documentary stamp tax (DST) payable on a loan even if no formal loan agreement was signed?

The Supreme Court answered this question in the affirmative in Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, 2011. The Court based its finding on Revenue Regulations No. 9-94.  It states:

Section 3. Definition of Terms. – For purposes of these Regulations, the following term shall mean:

(b) ‘Loan agreement’ – refers to a contract in writing where one of the parties delivers to another money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. The term shall include credit facilities, which may be evidenced by credit memo, advice or drawings.

The terms ‘Loan Agreement” under Section 180 and “Mortgage’ under Section 195, both of the Tax Code, as amended, generally refer to distinct and separate instruments. A loan agreement shall be taxed under Section 180, while a deed of mortgage shall be taxed under Section 195.”

“Section 6. Stamp on all Loan Agreements. – All loan agreements whether made or signed in the Philippines, or abroad when the obligation or right arises from Philippine sources or the property or object of the contract is located in the Philippines shall be subject to the documentary stamp tax of thirty centavos (P0.30) on each two hundred pesos, or fractional part thereof, of the face value of any such agreements, pursuant to Section 180 in relation to Section 173 of the Tax Code.

In cases where no formal agreements or promissory notes have been executed to cover credit facilities, the documentary stamp tax shall be based on the amount of drawings or availment of the facilities, which may be evidenced by credit/debit memo, advice or drawings by any form of check or withdrawal slip, under Section 180 of the Tax Code. (underscoring supplied)

The Supreme Court ruled:

Applying the aforesaid provisions to the case at bench, we find that the instructional letters as well as the journal and cash vouchers evidencing the advances FDC extended to its affiliates in 1996 and 1997 qualified as loan agreements upon which documentary stamp taxes may be imposed.

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