New DST rule on intercompany advances; lessor regulations
THE Supreme Court in the case of Commissioner of Internal Revenue vs. Filinvest Development Corp., G. R. No. 163653, July 19, 2011 laid down the new rule that now imposes the Documentary Stamp Tax on intercompany advances and memos between intercompany memos. Prior to the aforementioned ruling of the Supreme Court, intercompany advances and memos between affiliate companies used to be exempt from the Documentary Stamp Tax on loan agreements.
The Supreme Court ruled that the Tax Code imposes the Documentary Stamp Tax on “(a)ll 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 or used in the Philippines.”
Correlatively, the Supreme Court then referred to Section 3 (b) and Section 6 of Revenue Regulations No. 9-94 which defined a ‘Loan agreement’ as 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. Moreover, Section 6 of the same Regulation states that “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.”
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Lessor regulations
THE Bureau of Internal Revenue (“BIR”) issued Revenue Regulations No. 12-2011 imposing reportorial requirements for establishments leasing or renting out spaces for commercial activities.
Owners or sub-lessors of commercial establishments/buildings/spaces must now ensure that the person intending to lease their commercial space is a BIR-registered taxpayer which means that such prospective lessee must have a Tax Identification Number, a BIR Certificate of Registration, and dult registered receipts, sales or commercial invoices in compliance with Section 237 and 237 of the Tax Code.
Every 31st of January starting from the current year (for tenants as of Dec 31st of the previous year) and 31st of July starting from the current year (for tenants as of June 30th of the current year), all owner or sub-lessors of commercial establishments/buildings/spaces are required to submit to the BIR Revenue District Office where the commercial establishments/buildings/spaces are located the following information, under oath, in hard and soft copies:
Building / Space layout of the entire area being leased with proper unit/space address or reference; Certified True Copy of Contract of Lease per Tenant; and The Lessee Information Statement per BIR prescribed format.
Failure to comply with this regulation will result to imposition of penalties.
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