Understanding DST or Documentary Stamp Tax in Philippine Transactions

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You may have encountered the DST when doing certain transactions. According to tax services in Manila, a documentary stamp tax or DST is a tax imposed on instruments, documents, loan agreements, and papers showing proof of acceptance, assignment, sales and transfer obligations, rights, or property.

Imposed on the Exercise of Certain Rights

The documentary stamp tax or DST is a kind of tax that is imposed on the exercise of certain rights. As long as you exercise that, formal documents of that exercise of right may be taxed. Simply put, it’s a stamp that certifies an agreement is taxable. The DST tax declaration is called the BIR Form 2000, which must be paid and filed within five days upon the month’s end when the taxable documents were issued, signed, accepted, or transferred. 

However, documents aren’t always necessary for taxes to be imposed. An example is for DST on stock shares, you do not need to get issued a stock certificate for it to be taxable. Another one is that you do not need a notarized loan agreement for a DST on loan agreements to be taxable. Keep in mind that there are specific transactions stated in the NIRC or the National Internal Revenue Code which means not all of your transactions are subject to DST. It would be prudent to seek advice from accounting services in the Philippines to be sure. 

Any Contracting Party Can Make Payments

If you are one of the parties involved in the taxable transaction, you may be liable depending on your contract. Some contracts like the Deed of Absolute Sale of Real Properties, Loan Agreements, or Deed of Assignment of Shares of Stocks allow you to decide which party will shoulder it. This however is only binding to the parties and not to the BIR or the Bureau of Internal Revenue. 

During the assessment of taxes, BIR will ensure that DST on such transactions is paid. That’s why it is important to keep your proof of payment of your DST for your own security. Remember that DST is only imposed once. Letting one party make the payment would be enough because if both parties pay, it would become an excess.

Not Paying Will Have No Effect on Your Transaction

If you have an agreement with another party and you fail to pay your DST, your agreement will still be valid. DST liability is solely for tax purposes and it will not affect the validity of your contracts. Noteworthy, in court action cases involving documents subject to DST, the court will not admit the same as evidence unless you pay your DST on such document. 

Even if this rule does not affect your liabilities, you should not take it as a justification for not paying. DST is imposed on every eligible transaction you make. Tax and audit services in the Philippines say that if you fail to pay one transaction, you will get an offense/ penalty for that specific transaction. 

Rates Vary Depending on your Transaction

DST has a varied application which means that there is no fixed rate for your taxable transactions. The rate will depend on the nature of your transaction. Given that, you will have to determine the rate applicable to your transaction in the NIRC. For example, the applicable rate for DST on loan agreements is Php 1.00 for every Php 200.00 par value. DST on rental agreements on the other hand would have a rate of Php 3.00 for the first Php 2,000.00 and Php 1.00 for every succeeding Php 1,000.00 of your rental amount.

How to Pay

To pay your DST, you can either pay it manually, pay it through the electronic filing and payment system, or through loose documentary stamps. The loose documentary stamps are the ones attached to official documents or certificates issued by government agencies. 

The subsequent transactions are liable to DST under the National Internal Revenue Code (NIRC):

  • Original Issue of Stock Shares
  • Sales, Agreements to Sell, Memoranda of Sales, Deliveries/Transfer of Shares, Certificate of Stocks
  • Bonds,  Debentures, Stock Certificates, Indebtedness Issued in a Foreign Country
  • Certificate of Profit in Property or Accumulations
  • Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, Other Instruments
  • Debt Instruments
  • Bills of Exchange, Foreign Bills of Exchange and Credit Letters
  • Life Insurance Policies, Insurance upon Property Policies
  • Fidelity Bonds, Insurance Policies
  • Annuity and Pre-Need Plan Policies
  • Indemnity Bonds
  • Certificates
  • Warehouse Receipts
  • Horse Race Tickets, Lotto, other authorized Number Games
  • Bills of Receipts
  • Proxies
  • Powers of Attorney
  • Lease and other Hiring Agreements
  • Pledges, Deeds of Trust, mortgages
  • Deeds of Real Property Sale and Conveyances
  • Charter Parties
  • Assignments and Renewals of Certain Instruments

Now you’ve understood the realm of Documentary Stamp Tax! Grasping the intricacies of this tax ensures that your transactions are not just legally solid but also BIR-approved. Ready to navigate the DST landscape with confidence? Reach out to our accounting services in Pasig for expert assistance today!