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Hopewell Power (Philippines) Corp vs CIR CTA Case Ponente: Acosta (CTA Judge) Tax Term: Documentary Tax

Stamp -Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.

Doctrine: Facts: *Please note the nationalities of the companies involved. Hopewell Power is a Philippine Corporation engaged in the business of energy. On Dec 29,1993 Hopewell Philippines, together with Hopewell Energy Intl (mother company based in Hong Kong), entered into a Mortgage Trust Indenture (MTI) with the Bank America Trust Company, an American Corporation, for the mortgage of Hopewell Philippines's chattel and real estate assets in the Philippines. The MTI was executed in Hong Kong. Hopewell Phils. Paid under protest a documentary stamp tax of P24,864,781.58 to the BIR in order to facilitate the registration of the MTI with the Register of Deeds of Lucena. On the same day that they paid under protest, Hopewell sent a letter to the BIR asking for confirmation on the tax exemption from documentary stamptax of mortgage documents executed abroad. The BIR did not respond to such letter thus on 1995, Hopewell sent a written claim for refund of what it paid but this was not acted upon as well. Thus this suit in the Court of Tax appeals. Petitioner's Argument: The Documentary Stamp Tax, being an excise tax, does not attach to the execution of documents in Hong Kong. That at the time the MTI was executed, the prevailing provision os sec 173 of the tax code did not cover documents executed abroad. Respondent's Argument: The tax was paid in accordance with sec 195 of the Tax Code. That Petitioner failed to show proof that the documents were executed in Hong Kong. That claims for refund are construed against the claimant. Issue: WON Documentary Stamp Tax has to be paid on documents executed abroad but with objects arising from Philippine sources. Court Ruling: Yes it has to be paid now because the law was amended but at the time of execution of mortgage by Hopewell, the Documentary Stamp Tax cannot be levied on documents executed abroad. Petitioner was able to provide a notarized copy of the MTI with authentication of the Philippine Consul in Hong Kong, thus proving that the MTI was indeed executed in Hong Kong. The power to levy an excise upond the performance of an act or the engaging of an occupation does not depend ipon the domicile of the person subject to the excise, nor upon the physical location of the property and in connection with the act or occupation taxed, but depends upon the place in which the

act is performed or occupation engaged in. The gauge for taxability does not depend on the the location of the office, but attaches ipon the place where the respective transaction is perfected and consummated(Koppel vs Yatco) Thus since the MTI was execucted and signed in HK prior to RA 7660. No DSY is imposable on it in the Philippines. One of the inherent limits of taxation is that it may be exercised only within the territoral jurisdiction of the taxing authority. It must be noted however that RA 7660, promulgatedon Jan 14,1994, has amended sec 173 of the tax code as imposing the DST not directly anymore on transaction documents but rather now on the act or privilege of transactig on any obligation or right arising from Philippine sources. (In short, before the amendement the tax was on the documents proper, but now the tax in on the act or privilege of transacting with pobjects or rights found in the Philippines)