Kinds of Excise Taxes

a. Specific Tax
-Based on weight or volume capacity or any other physical unit or measurement
b. Ad Valorem Tax
- Based on selling price or other specified value of the goods

Goods/Articles

i. Alcohol Products
ii. Tobacco
iii. Petroleum
iv. Automobiles
v. Non- Essential Goods
vi. Non-Essential Services
vii. Sweetened Beverages

Imported Articles

 Importer or owner

All gods imported into the Philippines shall be deemed to be the property of the consignee
or the holder of the bill of lading, airway bill o other equivalent transport document if duly endorsed
by the consignee therein, or, if consigned to order, duly endorsed by the consignor. The
underwriters of abandoned goods and the salvors of goods and saved from wreck at sea, coast, or in
any area of the Philippines, may be regarded as the consignees.

 Where tax-free articles brought or imported into the Philippines by persons, entities, or
agencies exempt from tax are subsequently sold, transferred or exchanged in the Philippines
to non-exempt entities;
 The purchase of recepeints shall be considered the importers thereof
 They shall be liable for the duty and internal revenue tax on such importation
 Persons found in possession of articles which are exempt from excise taxes other than those
legally entitled to the exemption

Domestic Articles

 Manufacturers or producers
 Before removal from the place of production
 If removed without the payment of the tax, the owner or person in possession of the
articles
 In case of indigenous petroleum, natural gas or liquefied natural gas
 The first buyer, purchaser or transferee for local sale, barter or transfer
 Owner, lessee, concessionaire or operator of the mining claim, if exported

 Persons Liable
Non Essential Services
 Persons, natural or juridical, who perform the services

 Gross Selling Price

a. The whole price, excluding the VAT, at which the goods are sold in the place of
production or through their sales agents to the public
b. If the manufacturer also sells or allows such goods to be sold at wholesale in
another establishment of which he is the owner or in the profits of which he has
an interest, the wholesale price in such establishment
c. Should such price be less than the cost of manufacture plus expenses incurred
until the goods are finally sold, then, a proportionate margin of profit, not less
than 10% of such manufacturing cost and expenses shall be added
 Exempt Petroleum Products
a. Sold to international carriers of Philippines or foreign registry on their use or
consumption outside the Philippines.

The petroleum products sold to these international carriers shall be stored

in a bonded storage tank and may be disposed of only in accordance with the
rules and regulations prescribed by the Secretary of Finance, upon the
recommendation of the Commissioner

b. Sold to exempt entities or agencies covered by tax treaties, conventions and

other international agreements for their use or consumption

The country of said foreign international carriers or exempt entities or

agencies exempts from similar taxes petroleum products sold to Philippine Carriers entities
or agencies

c. Sold to entities which are by law exempt from direct and indirect taxes
 Excuse tax is a tax on property
 The exemption from the excise tax expressly granted under Section 135 of
the NIRC must be construed in favour of the petroleum products on which
excise tax was initially imposed
 The statutory taxpayer who is directly liable to pay the excise tax on its
petroleum products, is entitled to a refund or credit of the excise taxes it
paid for petroleum products sold to the specified entities
 CIR v. PILIPINAS SHELL, G.R. NO. 188497 19 FEB 2014
 The tax privilege of PAL provided in Section 13 of PD 1590 has not been revoked by Section
131 of the NIRC of 1997, as amended by Section 6 of RA 9334
 PAL’s importations of alcohol and tobacco products which were intended for use in its
commissary supplies during international flights are exempt from excise taxes
1) Such supplies are imported for the use of the franchisee in its transport/non-
transport operations and other incidental activies; and
2) They are not locally available in reasonable quantity, quality and price
 CIR v. PAL GR Nos 212536-37

 Non-Essential Services
- Services performed on invasive cosmetics, procedures, surgeries, and body
enhancements directed solely towards improving, altering, or enhancing the
patient’s appearance and do not meaningfully promote the proper function of the
body or prevent or treat illness or disease
 Cosmetic Surgery
- Shall refer to a type of plastic surgery that aims to improve a persons’ appearance,
through invasive cosmetic procedures, surgeries, and body enhancements directed
solely on improving, altering, or enhancing the person’s appearance and do not
necessarily promote the proper functions of the body or prevent or treat illness or
disease.
- Can be performed in all areas of the head, neck, and body.
- Since the treated areas function properly cosmetic surgery is elective
 Invasive Cosmetic Procedure
- Shall refer to a cosmetic surgery that is carried out by entering the body through the
skin or through a body cavity or anatomical opening, but with the smallest damage
possible to these structures
 Non-Invasive Cosmetic Procedure
- Shall refer to a conservative treatment that does not require incision into the body
or the removal of tissue, or when no break in the skin is created and there is no
contact with mucosa, or skin break, or internal body cavity beyond a natural or
artificial body orifice.
 Gross Receipts
- Shall mean the total amount of money or its equivalent representing the contract
price or service fee, including deposits applied as payments for services rendered
and advance payments actually or constructively received for services performed or
to be performed for another person, but excluding five percent (5%) excise tax and
value added tax (VAT)
- For purposes of determining the VAT base, the gross receipts shall be inclusive of
the 5% excise tax.
 Constructive receipt
- Occurs when the money consideration or its equivalent is placed under the control
of the person who rendered the service without restrictions by the payor/customer.
This shall cover exchange deal arrangements.

DOCUMENTARY STAMP TAX

 Nature
 An excise tax on the exercise of right or privilege to transfer obligations, rights
properties incident threto. ( MICHEAL J. LHUILLIER PAWNSHOP v. CIR; G.R. No.
166786)
 In general, documentary stamp taxes are 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. ( PHILIPPINE HOME
ASSURANCE CORPORATION v. CA; G.R No. 119446; 21 Jan 199)
 Factors
 Document
 Nature and character of transaction
 PHILIPPINE BANKING CORPORATION VS CIR; G.R No. 170574
 The liability of an instrument to the DST and the amount of tax are determined by the form
and face thereof and cannot be affected by proofs of facts outside of the instrument itself
(U.S [Link], 17 wall [ 84 U.S] 496

 Time for Filing and Payment

 Within 10 days after the close of month when the taxable document was made,
signed, issued, accepted, or transferred

 Exempt Documents

 SEC. 199
 Donations exempt from donor’s tax under Sec. 101(a) &(b)

 Original Issuance of Shares of Stock

 Issuance
- The point in which the stockholder acquires and may exercise attributes of
ownership over the stocks

 Deposit on Stock Subscription

- Merely an amount of money received by a corporation with a view of applying the
same as payment for additional issuance of shares in the future, an event which may
or may not happen.
- The person making a deposit on stock subscription does not have the standing of a
stockholder and he is not entitled to dividends, voting rights or other prerogatives
and attributes of a stockholder.
- The corporation is not liable for the payment of DST on its deposit subscription for
the reason that there is yet no subscription that creates rights and obligations
between the subscribers and the corporation( CIR v. FIRST EXPRESS PAWNSHOP)

Original Issuance of Shares of Stock

Basis

i. Par value
ii. Actual Consideration, if no par value
iii. Actual represented by each share, if stock dividends

Par value if indicated in the certificates (LINCOLN PHILIPPINES v. CA G.R. No. 118043)

 Debt Instruments

Certificate of Deposit
The negotiable character of the documents is immaterial for purposes of imposing
DST (INTERNATIONAL EXCHANGE BANK v. CIR G.R. No. 171266)

A certificate of deposit is defined as a written acknowledgment by a bank or banker

of the receipt of a sum of money on deposit which the bank or banker 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 and creditor between the bank and the depositor is created. (FAR
EAST BANK v. QUERIMIT G.R No. 148582)

A document 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.( INTERNATIONAL EXCHANGE BANK v. CIR G.R. No. 171266)

A passbook issued by a bank qualifies as a certificate of deposit drawing interest

because it is considered as a written acknowledgement by a bank that is accepted a deposit
of a sum of money from a depositor.( INTERNATIONAL EXCHANGE BANK v. CIR G.R. No.
171266)

The instructional letters as well as the journal and cash vouchers evidencing the
advances FDC extended to its affiliates in 1996 and 1997 qualified as loan agreement upon
which documentary stamp taxes may be imposed. (CIR v. FDC GR NOs. 163653 & 167689)

When a loan agreement and a promissory note are simultaneously issued and
executed, the loan having been secured by the promissory note, only one DST shall be
imposed on either loan agreement or promissory note, whichever will yield a higher tax.

 Life Insurance Policies

CIR v. LINCOLN PHILIPPINE LIFE INSURANCE; G.R. No. 119176

The increase in the sum assured brought about by the “automatic increase” clause
incorporated in the Policy is subject to DST, notwithstanding that no new policy has been
issued, because the date of the effectivity of the increase, as well as its amount, are already
defined and determinable at the time the policy is issued.

The automatic increase clause is in the nature of a conditional obligation under Article 1116
of the Civil Code, by which the increase of the insurance coverage shall depend upon the
happening of the event which constitutes the obligation.
CIR v. MANILA BANKERS LIFE INSURANCE G.R. No. 169103

Where under the “guaranteed continuity”, the increase in the life insurance coverage is only
corollary to the new premium rate imposed based upon the insured’s age at the time the
continuity clause was availed of, such increase is not automatic, is never guaranteed, are is
certainly neither definite nor determinable at the time the policy was issued.

The increase in the sum assured brought about by the guaranteed continuity clause cannot
be subject to DST under section 183.

Section 198 speaks of assignments and renewals. In the case of insurance policies, this
section applies only when such policy was assigned or transferred. The provision which
specifically applies to renewals of life insurance policies is Section 183.

Plainly, an insurance contract may again attract DST at the same rate when it is (a)
assigned or transferred or (b) renewed or continued by alteration or otherwise. Under the
latter circumstance, an alteration of the policy may result in attracting DST, though no new
policy is issued.

 FIDELITY BONDS AND OTHER INSURANCE POLICIES

PHILIPPINE HEALTH CARE PROVIDERS v. CIR G.R. No. 167330

Requisites:

1. The document must be a policy of insurance or an obligation in the nature of indemnity;

2. The maker should be transacting the business of accident fidelity, employer’s liability, plate,
glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life,
marine, inland, and fire insurance)

Principal object and purpose test

 If the assumption of risk and indemnification of loss (which are elements of

insurance business) are the principal object and purpose of the organization, the
business is that of insurance
 If they are merely incidental and service is the principal purpose, then the business
is not insurance

A Health Care Agreement is Not an insurance contract.

i. Even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance
ii. Not all necessary elements of a contract of insurance are present in the agreement.
There is nothing in the agreement that gives rise to a monetary liability on the part
of the members to any third party-provider of medical services which might in turn
necessitate indemnification from HMO.
iii. According to the agreement, a member can take advantage of the bulk of the
benefits anytime, e.g laboratory services, x-ray routine annual physical examination
and consultations, vaccine administration as well as family planning counselng, even
in the absence of any peril, loss or damage on his or her part.
iv. In case of emergency, a HMO is obliged to reimburse the member who receives care
from a non-participating physician or hospital. However, this is only a very minor
part of the list of services available. The assumption of the expense by petitioner is
not confined to the happening of a contingency but includes incidents eve in the
absence of illness or injury.

Assuming that petitioner’s commitment to provide medical services to its members can be
construed as an acceptance of risk that it will shell out more than the prepaid fees, it still will
not qualify as an insurance contract because petitioner’s objective is to provide medical
services at reduced cost, not to distribute risk like an insurer.

 MICHEL K. LHUILLER PAWNSHOP [Link] GR No. 166785

The subject of a DST is not limited to the document embodying the enumerated transactions. A
DST is an excise tax on the exercise of a right or privilege to transfer obligations, rights or
properties incident thereto.

Pledge is among the privileges, the exercise of which is subject to DST. A pledge may be
defined as an accessory, real and unilateral contract by virtue of which the debtor or a third person
delivers to the creditor or to a third person movable property as security for the performance of
the principal obligation, upon the fulfillment of which the thing pledged, with all its accessions
and accessories, shall be returned to the debtor or to the third person.

Section 195 of the NIRC imposes a DST on every pledge regardless of whether the asme isa
conventional pledge governed by the Civil Code or one that is governed by the provisions of PD
No. 114. All pledges are subject to DST, unless there is a law exempting them in clear and
categorical language. This explains why the Legislature did not see the need to explicitly impose
a DST on pledges entered into by pawnshops. These pledges are already covered by Section
195 and to create a separate provision especially for them would be superfluous.

 DEEDS OF SALE, CONVEYANCE AND DONATION OF REAL PROPERTY

FORT BONIFCATIO DEVELOPMENT CORP v. CIR G.R No 164155 & 175543

The sale of Fort Bonifacio land was not a privilege but an obligation imposed by law which was
to sell lands in order to fulfill a public purpose. To charge DST on a transaction which was
basically a compliance with a legislative mandate would go against its very nature as an excise
tax.

CIR v. LA TONDENA DISTILLERS G.R. No. 175188 citing CIR v. PILIPINAS SHELL GR
No. 192398
- The transfer of real properties to the surviving corporation in pursuance of a merger is
not subject to documentary stamp tax.
- Section 199(m)
- Exempt Donations

 Effect of Failure to Stamp Taxable Document

- Shall not be recorded

- Not admissible in evidence in any court
- Shall not be notarized