There are different DST rates on different types of transactions like loan agreements, lease agreements, mortgages, and there are also exemptions from DST. For this post, I will discuss these, including the deadline and venue for filing the DST return.
In my previous post on How to Easily Compute DST, I was referring to DST on the sale of real property.
I will provide you as well with a blank DST form for your use and reference. Take note that most of this post was actually written by my wife.
DST on the sale of real property
Section 196 of the Tax Code, as amended, provides:
“SEC. 196. Stamp Tax on Deeds of Sale and Conveyances of Real Property. — On all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher: Provided, That when one of the contracting parties is the Government, the tax herein imposed shall be based on the actual consideration:
(a) When the consideration, or value received or contracted to be paid for such realty, after making proper allowance of any encumbrance, does not exceed One thousand pesos (P1,000), Fifteen pesos (P15.00).
(b) For each additional One thousand pesos (P1,000), or fractional part thereof in excess of One thousand pesos (P1,000) of such consideration or value, Fifteen pesos (P15.00).
When it appears that the amount of the documentary stamp tax payable hereunder has been reduced by an incorrect statement of the consideration in any conveyance, deed, instrument or writing subject to such tax the Commissioner, provincial or city Treasurer, or other revenue officer shall, from the assessment rolls or other reliable source of information, assess the property of its true market value and collect the proper tax thereon.”
Take note that if the tax base is incorrect (for example, the selling price or the zonal value is understated to lower the DST), the true value of the property may be assessed so that the proper tax may be collected. Please refer to my previous post on How to Easily Compute DST as to the sample computations.
DST on loan agreements
“SEC. 179. Stamp Tax on All Debt Instruments. — On every original issue of debt instruments, there shall be collected a documentary stamp tax on One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the issue price of any such debt instruments: Provided, That for such debt instruments with terms of less than one (1) year, the documentary stamp tax to be collected shall be of a proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan.
For purposes of this section, the term debt instrument shall mean instruments representing borrowing and lending transactions including but not limited to debentures, certificates of indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the object of contract is located or used in the Philippines, instruments and securities issued by the government of any of its instrumentalities, deposit substitute debt instruments, certificates or other evidences of deposits that are either drawing interest significantly higher than the regular savings deposit taking into consideration the size of the deposit and the risks involved or drawing interest and having a specific maturity date, orders for payment of any sum of money otherwise than at sight or on demand, promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation.”
DST on lease agreements
If you will be leasing out your property, DST will be imposed at the rate of P3.00 for the first P2,000.00 and an additional P1.00 for every P1,000.00 in excess of the first P2,000.00 pursuant to Section 194 of the Tax Code, to wit:
“Section 194. Stamp tax on Leases and Other Hiring Agreements. – On each lease, agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there shall be collected a documentary stamp tax of Three pesos (P3.00) for the first Two thousand pesos (P2,000), or fractional part thereof, and an additional One peso (P1.00) for every One Thousand pesos (P1,000) or fractional part thereof, in excess of the first Two thousand pesos (P2,000) for each year of the term of said contract or agreement.”
To compute DST, multiply the monthly rent by 12 months and then by the number of years stated in the contract. Subtract P2,000.00 and multiply the amount by .001, then add P3.00.
For example, the monthly rent is P10,000.00, and the contract is for 3 years. The DST is computed as follows:
Monthly rent P10,000.00
Multiply by 12 months
Annual rent = P120,000.00
Multiply by 3 years
Total contract amount = P360,000.00
Subtract P2,000 = P358,000.00
Multiply this by .001 = P358
DST = P361.00
As a shortcut, multiply the contract amount by .001 and add P1.00 to get the DST.
If the total contract amount is not a multiple of P1,000.00, for example, it’s P360,500.00, round it up to the next 1,000 then multiply the contract amount by .001 and add P1.00 to get the DST.
DST on mortgages
Section 195 of the Tax Code provides:
“Section 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. – On every mortgage or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due and owing of forborne to be paid, being payable and on any conveyance of land, e
state, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise, there shall be collected a documentary stamp tax at the following rates:
(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00).
(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).
On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the payment of a fluctuating account or future advances without fixed limit, the documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or deed of trust is specified in such mortgage, pledge or deed of trust, the documentary stamp tax prescribed in this Section shall be paid and computed on the full amount of the loan or credit granted.”
To compute DST, subtract P5,000 from the contract amount, then divide what’s left by P5,000.00 and round off any decimal to the higher number. Multiply this by 10 then add P20.00.
To illustrate, if the amount secured is P106,000.00, the DST is computed as follows:
Amount secured P106,000.00
Subtract P5,000 = 101,000
Divide by P5,000.00 = 20.20
Round off to higher number = 21
Multiply by 10 = 210
Add 20 = P230 DST
As a shortcut, divide the contract amount by P5,000.00 and round off any decimal to the higher number. Multiply this by 10 then add P10.00.
Exemptions from DST
Section 199 of the Tax Code, as amended, provides the documents which are exempt from DST, including loan agreements which does not exceed P250,000, viz:
“(d) Loan agreements or promissory notes, the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000), or any such amount as may be determined by the Secretary of Finance, executed by an individual for his purchase on installment for his personal use or that of his family and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture: Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance with a relevant price index but not to exceed ten percent (10%) of the current amount and shall remain in force at least for three (3) years.”
Deadline for filing the DST return
Under Revenue Regulations (RR) No. 5-2009 dated March 16, 2009, the DST Return (Click here for BIR Form No. 2000-OT) shall be filed within five (5) days after the close of the month when the taxable document was made, signed, accepted or transferred. For example, the DST on a taxable document signed on April 15, 2009 will be due on May 5, 2009.
As per Guidelines and Instructions for BIR Form No. 2000-OT, the following are applicable penalties:
1. A surcharge of twenty-five percent (25%) for the following violations:
a. Failure to file any return and pay the amount of tax due on or before the due date;
b. Filing a return with a person or office other than those with whom it is required to be filed, unless otherwise authorized by the Commissioner;
c. Failure to pay the full or part of the amount of tax shown on the return, or the full amount of tax due for which no return is required to be filed on or before the due date;
d. Failure to pay the deficiency tax within the time prescribed for its
remittance in the notice of assessment.
2. A surcharge of fifty percent (50%) of the tax or of the deficiency tax, in case
any payment has been made on the basis of such return before the discovery of the falsity or fraud, for each of the following violations:
a. Willful neglect to file the return within the period prescribed by the Code or by rules and regulations; or
b. A false or fraudulent return is willfully made.
3. Interest at the rate of double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for remittance until the amount is fully remitted: Provided, That in no case shall the deficiency and the delinquency interest prescribed under Section 249 Subsections (B) and (C) of the National Internal Revenue Code, as amended, be imposed simultaneously.
4. Compromise penalty as provided under applicable rules and regulation
Please make sure you don’t miss the deadline as the penalties are significant. This happened in one of our transactions where we missed paying for the doc stamps tax by just a day and I will always regret the amount of money wasted. 🙁
Venue for filing the DST return
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To our financial freedom!
Real Estate Investor
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