DST exemption leads to revenue loss

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The exemption of qualified loans during the enhanced community quarantine (ECQ) period from the documentary stamp tax (DST) is justifiable, however this will result to substantial revenue loss.

The National Tax Research Center (NTRC) said the Bureau of Internal Revenue (BIR) needs to ensure efficient collection of DST on transactions not covered by the exemption.

In a study titled, Tax implications of Republic Act (RA) No. 11469 on DST, the state think tax assessed the tax implications of the exemption from DST on specific transactions during the ECQ period.

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To effectively enforce RA No. 11469 or the Bayanihan to Heal As One Act, which is the government’s response measure to mitigate the impact of the coronavirus disease 2019 (COVID) pandemic, issuances were drafted to provide an exemption from DST on loans falling due within the ECQ period.

The issuance of revenue regulation 8-2020 provides that no additional DST will be imposed on credit extensions and credit restructuring, micro-lending, including those obtained from pawnshops, during the ECQ period.

Specifically, it provides that sections 179 (stamp tax on all debt instruments), 195 (stamp tax on mortgages, pledges, and deeds), and 198 (stamp tax on assignments and renewals of certain instruments) of the National Internal Revenue Code (NIRC) will not be applied to extended loans during the ECQ.

“From the projected collection of DST in 2020 amounting to P188 billion, around 46 percent or P86 billion is estimated to come from DST imposed under sections 179, 195, and 198, while P102 billion would be generated from other transactions subject to DST under the NIRC,” the NTRC study said.

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