Summary
RMC No. 46-2014 clarifies that financial lease is subject to Documentary Stamp Tax under Section 179 of the NIRC, as amended.
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Key points
- Definition used. Revenue Regulations No. 9-2004 defines Financial Leasing as a mode of extending credit through a non-cancellable lease contract. The lessor buys the property at the lessee’s instance, and the lessee pays fixed periodic amounts sufficient to amortize at least 70% of the purchase price or acquisition cost, plus a margin of profit, over an obligatory period of not less than two (2) years, with no obligation or option to buy the property at the end.
- Akin to a debt. A finance lease transfers substantially all the risks and rewards of ownership, and title may or may not be transferred. Financial lease is treated like an obligation, and IAS 17 requires a liability to be set up in the lessee’s books.
- DST coverage. Financial lease documents are not specifically named in Section 179 of the NIRC. However, Section 179 covers all debt instruments, so any document, transaction or arrangement under a financial lease is subject to DST under that Section.
Who is affected
- Parties to financial lease transactions
Deadlines and effectivity
- Issued May 30, 2014
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
Copies of BIR issuances are hosted here for reference. For the official version, check bir.gov.ph. Summaries by Tax Resources PH are not a substitute for the full text or professional advice.