Documentary stamp tax on special savings accounts

IN Philippine Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 170574, January 30, 2009, the Supreme Court has ruled that Special Savings Accounts offered by banks are still subject to the documentary stamp tax.

Documentary stamp tax (DST) is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.

A DST is an excise tax because it is imposed on the transaction rather than on the document.

A DST is also levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments.

Hence, in imposing the DST, the Court considered not only the document but also the nature and character of the transaction.

The Tax Code imposes a DST on any certificate of deposit drawing interest. A certificate of deposit is a written acknowledgment by a bank of the receipt of a sum of money on deposit that the bank promises to pay to the depositor, to the order of the depositor, or to some other person or his order, whereby the relation of debtor or creditor between the bank and the depositor is created.

A document to be deemed a certificate of deposit requires no specific form as long as there is some written memorandum that the bank accepted a deposit of a sum of money from a depositor.

What is important and controlling is the nature or meaning conveyed by the passbook and not the particular label or nomenclature attached to it, inasmuch as substance, not form, is paramount.

Moreover, a certificate of deposit may be payable to the depositor, to the order of the depositor, or to some other person or his order.

From the use of the conjunction or, instead of and, the negotiable character of a certificate of deposit is immaterial in determining the imposition of DST.

The Court also cited the case of Banco de Oro Universal Bank v. Commissioner of Internal Revenue, where it was ruled that even if a special savings account transaction is through a passbook and not a certificate of deposit, it would still be subject to the DST.

It explained that like time deposit, special savings account transactions bear a fixed term or maturity because the bank acknowledges receipt of a sum of money on deposit that the bank promises to pay the depositor, bearer or to the order of a bearer on a specified period of time.

The Tax Code does not prescribed the form of a certificate of deposit. It may be any ‘written acknowledgment by a bank of the receipt of money on deposit.

The definition of a certificate of deposit is all encompassing to include a savings account deposits.

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