BIR clarifies taxability of financial lease

ANY DOCUMENT, transaction or arrangement entered into under financial lease is subject to Documentary Stamp Tax (DST).

This is the clarification made by the BIR in Revenue Memorandum Circular (RMC) No. 46-2014
issued on May 30, 2014.

The Bureau pointed out in the Circular that financial leasing, as defined in Revenue Regulations
No. 9-2004, is a “mode of extending credit through a non-cancellable lease contract”, which is “akin to a debt rather than a lease”.

Per Section 179 of the National Internal Revenue Code (NIRC), as amended, all debt instruments are
subject to DST in the amount of One Peso (P 1.00) on each Two Hundred Pesos (P 200.00), or fractional part thereof, of the issue price of every original issue of debt instrument, subject to conditions specified in the said Section of the Tax Code.

Although documents, transactions or arrangements entered into under financial lease are not
specifically mentioned in Section 179 of the NIRC, as amended, the same take the nature of an obligation that is subject to DST. (See full text of RMC 46-2014 at www.bir.gov.ph)

source:  BIR Monitor Volume 16 No. 6

Tax Code Reference :

RA 8424, SEC. 179. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and Other Instruments. - On each bank check, draft, or certificate of deposit not drawing interest, or order for the payment of any sum of money drawn upon or issued by any bank, trust company, or any person or persons, companies or corporations, at sight or on demand, there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50).