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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.

To compute the DST, divide the higher amount between the selling price and the fair market
value by P1,000.00, then round off the amount to next higher number if there are decimals,
then multiply it by P15.00. As a shortcut, multiply the higher amount between the selling
price and the fair market value by .015 and if the DST is not a multiple of 15, the DST shall
be the next higher multiple of 15.
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
If you will be taking out a loan, another type of DST may be imposed. Section 179 of the
Tax Code, as amended, provides for the DST on loan agreements, as follows:
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 loan agreements (which may be taken out in order to purchase real property ) is
thus computed as P1.00 for every P200.00. To compute the DST, divide the loan amount by
P200.00, then round off the amount to next higher number if there are decimals. As a
shortcut, multiply the loan amount by .005 and round off the amount to next higher number
if there are decimals.
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
Plus P3.00
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, its 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 whats 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 (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.
Venue for filing the DST return
The DST due shall be paid at the same time the aforesaid return is filed with the AAB
having jurisdiction over the place where the property being transferred is located 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 the Tax Code, whichever is higher.
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