Documentary Stamp Tax: Rates by Document

What it taxes

Documentary stamp tax is charged on documents, not on income. Section 173 imposes it on documents, instruments, loan agreements and papers, and on acceptances, assignments, sales and transfers of the obligation, right or property incident to them.

That distinction decides most arguments about it. DST is due because a document was made, signed, issued, accepted or transferred. Whether the transaction was profitable, or completed at all, does not enter into it.

The rates people actually need

Property sales: 1.5%, and it is not small

Section 196 charges ₱15.00 for the first ₱1,000.00 and ₱15.00 for each additional ₱1,000.00 or fractional part. Expressed as a rate that is 1.5%.

The base is the consideration contracted to be paid, or the fair market value, whichever is higher. Where one of the contracting parties is the Government, the tax is based on the actual consideration instead.

Understating the price does not work. Where the tax has been reduced by an incorrect statement of the consideration, the Commissioner, the provincial or city Treasurer, or another revenue officer shall assess the property at its true market value from the assessment rolls or other reliable information and collect the proper tax.

Transfers exempt from donor’s tax under Section 101(a) and (b) are also exempt from DST under Section 196.

The zonal value comparator has been repealed

Section 196 says fair market value is “determined in accordance with Section 6(E) of this Code”. Section 6(E) no longer exists.

BIR’s own consolidated Code carries the note that Section 6(E) was repealed by Section 38(c) of RA 12001, the Real Property Valuation and Assessment Reform Act, and that under Section 18(a)(3) of that Act the Commissioner uses the Schedule of Market Values or the actual gross selling price stated in the transaction documents, whichever is higher.

This is the same repeal that changed the base for capital gains tax. Any DST computation still reaching for a BIR zonal value is using a provision that has been struck out, even though the section that points to it still reads as though it were there.

Leases are charged per year of the term

Section 194 is the rate most often computed wrongly, because the charge repeats for each year of the term of the contract.

A ₱20,000.00 monthly lease on a two-year term:

A ten-year lease at the same rent is ₱4,820.00, not ₱482.00.

Loans: 0.75%, and only once

Section 179 charges 75% of 1% of the issue price of the debt instrument, so 0.75%. Two provisos matter more than the rate.

Short terms are prorated. For a debt instrument with a term of less than one year, the tax is a proportional amount based on the ratio of its term in days to 365 days. A 90-day loan of ₱1,000,000.00 carries 90/365 of ₱7,500.00, which is ₱1,849.32.

One loan, one tax. Only one documentary stamp tax is imposed on the loan agreement together with the promissory notes, the mortgage, the security interest over personal property, and other contracts issued to secure that loan. A lender charging DST separately on the mortgage and again on the promissory note for the same loan is charging twice for one liability.

“Debt instrument” is defined widely: debentures, certificates of indebtedness, due bills, bonds and loan agreements, including those signed abroad.

Mortgages

Where the mortgage secures a fluctuating account or future advances without a fixed limit, the tax is computed on the amount actually loaned at the time of execution, with additional DST paid on later advances.

Filing: 10 days after the month closes

The deadline runs from month end, not from the document date. A deed signed on 3 March and one signed on 30 March are both due on 10 April, which gives the first one 38 days and the second one 11.

There is an alternative to filing a return: the tax may be paid by purchase and actual affixture of stamps, or by imprinting them with a documentary stamp metering machine.

An unstamped document is not merely untaxed

Section 201 is the reason DST cannot be quietly skipped. A document required to be stamped, which has been signed, issued, accepted or transferred without being duly stamped:

• shall not be recorded; and
• neither it, nor any copy, nor any record of transfer of it, may be admitted or used in evidence in any court until the stamps are affixed and cancelled.

Separately, no notary public or other officer authorized to administer oaths may add a jurat or acknowledgment to a document subject to DST unless the proper stamps are affixed and cancelled.

So an unstamped deed is not a taxed-later deed. It is a deed that cannot be registered, cannot be notarised, and cannot be produced in court.

What a property sale actually costs

DST is one of several charges on a transfer, and it is the second largest.

On a ₱3,000,000.00 sale that is ₱180,000.00 of capital gains tax and ₱45,000.00 of DST before any local transfer tax or registration fee.

The documentary stamp tax calculator carries all five formulas on this page, including the lease charged per year of the term and the loan prorated by days.

Where this goes wrong

Computing a lease once instead of per year of the term. Section 194 charges for each year of the contract.

Using a zonal value as the comparator. Section 6(E) is repealed; RA 12001 puts the Schedule of Market Values in its place.

Paying DST twice on one loan. A single tax covers the loan agreement, the notes and the mortgage securing it.

Counting 10 days from the document date. The clock starts at the close of the month.

Treating an unstamped document as merely overdue. It cannot be recorded, notarised, or used in evidence.