By: Rani Factor

under Atty. Chua

Documentary Stamp Tax

Taxation 2
NIRC Title VII
Sections 173 – 201
28 sections
RELATED REVENUE ISSUANCES
RR No . 6 - 2001 , RMO No . 8 - 98 , RMO No . 15 - 2001
Docs. Stamp tax in a nutshell -
Overview
n 1. Definition & Description
n 2. Documents, Instruments etc.. Subject to
Docs. Stamp tax w/ Tax Rates in a Matrix
n Sample computation ( real estate )

n 3. Procedures
n 4. Time of filing and payment of tax
n 5. Some Questions
n Who are required to file?
n Where should it be filed?
n Is docs. Stamp tax absolute?
n

n 6. Documentary Requirements
n 7. Form

 PRESIDENTIAL DECREE No. 1045
November 5, 1976
MALACAÑANG M a n i l a
n WHEREAS, the Government is incurring revenue losses due to the use of fake or re-
used documentary and science stamps;
n WHEREAS, it is necessary to minimize if not eradicate this pernicious cause of revenue
loss;
n NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of
the powers vested in me by the Constitution, do hereby order and decree:
n Section 1. Any provision of law to the contrary notwithstanding, all existing
documentary and science stamps in denominations of ten pesos and above are
hereby withdrawn from circulation and declared without value. However, all
persons in possession of such documentary and science stamps are given three
months from the effective date of this decree to surrender such stamps to the
Bureau of Internal Revenue for the refund of the face value thereof.
n Section 2. Documentary and science stamps taxes of ten pesos or more shall be paid
to any authorized personnel of the Bureau of Internal Revenue or to the tellers of
any commercial bank, or to such other banks as may hereinafter be authorized to
accept payment of internal revenue taxes, who shall issue the corresponding
Official Receipt therefor.
n Section 3. No provision of this decree shall be deemed to abate or condone the
administrative, civil or criminal liability of any person for acts committed before
the enactment of this decree.
n Section 4. The Secretary of Finance, upon recommendation of the Commissioner of
Internal Revenue, shall issue the necessary regulations for the implementation of
this decree.
 Title 1


Documentary Stamp Tax



Defined



and
n


Described …
What is



Documentary

Stamp tax?
a. Stamp Tax Defined:
n In Commissioner v. Heald lumber co.,
 119 Phil 647
n

n The court described Docs. Stamp as an Excise

upon the facility used in the transaction of
the Business separate and apart from the
business itself.
b. Stamp Tax Defined:

n Phil. Law dictionary:

n An excise upon the privilege, opportunity or
facility offered at exchanges for the
transaction of the business.
 c. Described:

n 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.

 1) SEC.173.Stamp Taxes Upon Documents,
LoanAgreements,Instruments and Papers.

Upon documents, instruments, loan agreements and
papers, and upon acceptances, assignments, sales and
transfers of the obligation, right or property incident thereto,
there shall be levied, collected and paid for, and in respect of the
transaction so had or accomplished, the corresponding
documentary stamp taxes prescribed in the following Sections of
this Title, by the person making, signing, issuing, accepting, or
transferring the same wherever the document is made, signed,
issued, accepted or transferred when the obligation or right
arises from Philippine sources or the property is situated in the
Philippines, and the same time such act is done or transaction
had:Provided, That whenever one party to the taxable document
enjoys exemption from the tax herein imposed, the other party
who is not exempt shall be the one directly liable for the tax.
n

n
Title 2

Documents, instruments, and papers
etc..

Which needed to be stamped on

with their

corresponding fees and rates…

…in Matrix
 SEC. 174. Stamp Tax on
Debentures and Certificates of
Indebtedness.
Tax Code Document Taxable Unit Tax Due Per % of Unit Taxable Base
Section Unit

Sec. 174 Debentures P200.00 or P1.50 .75 Face value of

and fraction Document
Certificates of thereof
Indebtedness
 SEC. 175. Stamp Tax on Original
Issue of Shares of Stock.
Tax Code Document Taxable Unit Tax Due % of Unit Taxable Base
Section Per Unit

Sec. 175 Original Issue P200.00 or 2.00 1% Par value of

of fraction thereof shares of
Shares of stocks actual
Stock with consideration
par value for the
issuance of
Original Issue P200.00 or 1% shares of
of fraction thereof stocks
Shares of based on 2.00
Stock actual
without par consideration
value
 SEC. 176. Stamp Tax on Sales, Agreements
to Sell, Memoranda of Sales, Deliveries or
Transfer of Due-bills, Certificates of
Obligation, or Shares
of Certificates of Stock.

Tax Code Document Taxable Tax Due Per % of Unit Taxable Base
Section Unit Unit

Sec. 176 Sales, Agreements P200.00 or 1.50 .75% Par value of

to Sell, Memoranda fraction such duebills,
of Sales, Deliveries thereof certificate of
or Transfer of obligation or
Duebills, stocks
Certificate of
Obligation, or Shares
or Certificates of
Stock
 SEC. 177. StampTax on Bonds,
Debentures, Certificate of Stock or
Indebtedness Issued in Foreign
Countries.

Tax Code Document Taxable Tax Due Per % of Unit Taxable Base
Section Unit Unit

Sec. 177 Bonds, Debentures, P200.00 or 1.50 .75% Par value of

Certificate of Stock fraction such
or Indebtedness thereof bonds,
issued in foreign debentures or
Countries Certificate of
Stocks
 SEC. 178. Stamp Tax on Certificates
of Profits or Interest in Property or
Accumulations.

Tax Code Document Taxable Tax Due Per % of Unit Taxable Base
Section Unit Unit

Sec. 178 Certificate of Profits P200.00 or .50 .25% Face value of

or Interest in fraction such
Property or thereof certificate /
Accumulation memorandum
 SEC. 179. Stamp Tax on Bank Checks,
Drafts, Certificates of Deposit not Bearing
Interest, and Other Instruments.

Tax Code Document Taxable Tax Due Per % of Unit Taxable Base
Section Unit Unit

Sec. 179 Bank Checks, Drafts, On each 1.50

Certificate of Deposit Document
not bearing interest
and other
Instruments
 SEC. 180. Stamp Tax on All Bonds, Loan greements,
promissory Notes, Bills of Exchange, Drafts, Instruments
and Securities Issued by the Government or Any of its
Instrumentalities, Deposit Substitute Debt Instruments,
Certificates of Deposits Bearing Interest and Others Not
Payable on Sight or Demand.

Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable

Se ct ion Unit Unit Base

Sec. 180 Bonds, Loan Agreements,

Promissory Notes,
P200.00 .30 .15% Face value of
the
Bills of Exchange, or fracton instrument/do
Drafts, Instruments
and Securities Issued by the thereof cument
Government or any
of its Instrumentalities,
Deposit Substitutes
Debt Instrument,
Certificates of Deposit bearing
interest and others
not payable on sight
or demand (except
loan agreement or
promissory notes exceeding
P250,000.00 for
personal use or family use)
 SEC. 181. Stamp Tax Upon
Acceptance of Bills of Exchange
and
Others.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 181 Bills of Exchange or On each .30 .15% Face value of

order drawn in Document such bill
foreign country but of exchange or
payable in the order
Philippines or the equivalent
of
such value, if
expressed in
foreign
currency
 SEC. 182. Stamp Tax on Foreign Bills
of Exchange and Letters of
Credit.

Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base

Se ct ion Unit Unit

Sec. 182 Foreign Bills of P200.00 .30 .15% Face value of

Exchange and Letter such bill
of Credit or fracton of exchange or
thereof order or the
quivalent of
such value, if
expressed in
foreign
Currency
 SEC. 183. Stamp Tax on Life
Insurance Policies.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 183 Life Insurance P200.00 or .50 .25% Amount Insured

Policies fraction by
thereof the Policy
 SEC. 184. Stamp Tax on Policies of
Insurance Upon Property.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 184 Policies Of Insurance P4.00 .50 12.5% Premium

upon Property premium charged
or fraction
thereof
 SEC. 185. Stamp Tax on Fidelity
Bonds and Other Insurance
Policies.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 185 Fidelity Bonds and P4.00 .50 12.5% Premium

other Insurance premium charged
Policies or fraction
thereof
 SEC. 186. Stamp Tax on Policies
of Annuities and Pre-Need Plans.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 186 Policies of Annuities, P 200.00 1.50 .75% Capital of

Annuity or other annuity, or
instruments or if unknown 33
fraction 1/3
thereof times the annual
income
 SEC. 187. Stamp Tax on
Indemnity Bonds.
Tax Code Document Taxable Tax Due Per % of Unit Taxable Base
Section Unit Unit

Sec. 187 Indemnity Bonds P4.00 or .30 7.5% Premium

fraction charged
thereof
 SEC. 188. Stamp Tax on
Certificates.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 188 Certificates of Each 15.00

Damage or otherwise Certifica
and Certificate or
document issued by
any customs officers,
marine surveyor,
notary public and
certificate required
by law or by rules
and regulations of a
public offic
 SEC. 189. Stamp Tax on
Warehouse Receipts.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 189 Warehouse Receipts Each 15.00

(except if value does receipt
not exceed P200.00
 SEC. 190. Stamp Tax on Jai-Alai,
Horse Racing Tickets, lotto or
Other
Authorized Numbers Games.
Ta x Cod e Document Taxable Unit Tax Due % of Unit Taxable Base
Se ct ion Per Unit

Sec. 190 Jai-alai, Horse Race P1.00 cost of .10 10% Cost of the ticket
Tickets, lotto or ticket and
Other Authorized Additional
Number Games P0.10 on
every P1.00
or fraction
thereof if cost
of
ticket
exceeds
P1.00
 SEC. 191. Stamp Tax on Bills of
Lading or Receipts.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 191 Bills of Lading or Each Proxy 15.00

Receipts
(except charter
party)
 SEC. 193. Stamp Tax on Powers
of Attorney.
Ta x Cod e Document Taxable Tax Due Per % of Unit Taxable Base
Se ct ion Unit Unit

Sec. 193 Powers of Attorney Each 5.00

Document
 SEC. 194. Stamp Tax on Leases
and Other Hiring Agreements.
Ta x Cod e Document Taxable Unit Tax Due Per % of Unit Taxable
Se ct ion Unit Base

Sec. 194 Lease and other First 2,000 3.00 1.5%

Hiring agreements of
memorandum or For every 1.00 1%
contract for hire, use P1,000 or
or rent of any land fractional part
or tenements or thereof in
portions thereof excess of the
first P2,000 for
each year of the
term of the
contract or
agreement
 SEC. 195. Stamp Tax on
Mortgages, Pledges and Deeds
of Trust.
Ta x Cod e Document Taxable Unit Tax Due Per % of Unit Taxable
Se ct ion Unit Base

Sec. 195 Mortgages Pledges of First 5,000 20.00 .4% Amount

lands, estate, or Secured
property and Deeds On each P5,000 10.00 .2% Amount
of Trust or fractional . Secured
part thereof in
excess of 5,000
 SEC. 196. Stamp tax on Deeds of
Sale and Conveyances of Real
Property.
Ta x Cod e Document Taxable Unit Tax Due % of Unit Taxable Base
Se ct ion Per Unit

Sec. 196 Deed of Sale, First 1,000 15.00 1.5% Consideration or

instrument or writing For each 15.00 Fair
and Conveyances of additional 1.5% Market Value,
Real Property P1,000 or whichever is
(except grants, fractional part higher (if
patents or original thereof in government is a
certificate of the excess of party, basis
government) P1,000 shall be the
) consideration
 Sample computation on Real
estate

Kinds of Tax Office to file Rate and amount of tax

Capital gains Tax BIR = 6% x tax base

Documentary Stamp Tax BIR = 1.5% x tax base

Can be passed on to buyers

Transfer Tax Treasurer’s office = 1% x75% x tax base

buyer’s account

Registration Fee RD = base on table Buyer’s account

New Tax declaration Assessor’s office = about 250.00 buyer’s account

 Base on 2,000,000 Taxable
amount
Tax Rate Amount
Capital Gains 6% = 120,00.00

Docs. Stamp 1.5% = 30,000.00

Transfer tax 1% x 75% = 15,000.00

Registration Fee refer to table =

New Tax Declaration 250.00 = 250.00

 SEC. 197. Stamp Tax on Charter
Parties and Similar Instruments.
Ta x Document Taxable Unit Tax Due Per Unit % of Taxable Base
Cod e Unit
Se ct ion

Sec. 197 Charter parties 1,000 tons and P500.00 for the first 6 Tonnage and
months PlusP50 each
and below month or fraction thereof in
duration
Similar 1,001 to 10,000 excess of 6 months of the contrac
Instruments tons
t Over 10,000 P1,000 for the first 6
months Plus P100 each
tons month or fraction thereof in
excess of 6 months

P1,500 for the first 6

months Plus P150 each
month or fraction thereof in
excess of 6 months
Title 3

Documentary stamp

Tax

Procedures…
 PROCEDURES
n File BIR Form No. 2000 in triplicate (two copies for
the BIR and one copy for the taxpayer) with the
Authorized Agent Bank (AAB) in the Revenue
District where the seller or transferor is
registered, for shares of stocks or where the
property is located, for real property. In places
where there are no AAB, the return will be filed
directly with the Revenue collection Officer or
Authorized City or Municipal Treasurer.
n Submit all documentary requirements and proof of
payment to the Revenue District Office having
jurisdiction over the place of residence of the
seller.
Sec. 200 – b.
Time for Filing and Payment of the
Tax.
n Except as provided by rules and regulations
promulgated by the Secretary of Finance,
upon recommendation of the Commissioner,
the tax return prescribed in this Section shall
be filed within ten (10) days after the close
of the month when the taxable document
was made, signed, issued, accepted, or
transferred, and the tax thereon shall be
paid at the same time the aforesaid return is
filed.

 DEADLINES
n The Documentary Stamp Tax return (BIR Form
2000) shall be filed in triplicate (two copies for
the BIR and one copy for the taxpayer) within five
(5) days after the close of the month when the
taxable document was made signed, issued,
accepted or transferred; when reloading a
metering machine becomes necessary; or upon
remittance by Collection Agents of collection from
sale of loose stamps. The Documentary Stamp
Tax shall be paid upon filing of the return.
DOCUMENTARY



REQUIREMENTS
 Attachments
n 1. Photocopy of the document to which the
documentary stamp shall be affixed;
n 2. Original copy of duly approved Tax Debit
Memo, if applicable;
n 3. Proof of exemption under special laws, if
applicable.
n 4. Proof of payment of documentary stamp tax
paid upon the original issue of the stock, if
applicable.
 Note: All background information
must be properly filled up.
n § All returns filed by an accredited tax agent on behalf of a
taxpayer shall bear the following information:
n A. For CPAs and others (individual practitioners and members
of GPPs);
n a.1 Taxpayer Identificat ion Number (TIN); and
n a.2 Certificate of Accreditation Number, Date of Issuance,
n and Date of Expiry.
n B. For members of the Philippine Bar (individual practitioners,
members of GPPs): b.1 Taxpayer Identification Number
(TIN); and
n b.2 Attorney’s Roll Number or Accreditation Number, if any.
n · BIR Form 2000-OT (in triplicate copies) should be filed for
every taxable document/transaction. Constructive affixture
means filing a tax return and paying the tax in accordance
 DOCUMENTARY REQUIREMENTS
n 1) Photocopy of document(s) to which the
documentary stamp shall be affixed, in case of
constructive affixture of Documentary Stamp Tax
n

n 2) For metering machine users, a schedule of the

details of usage or consumption of documentary
stamp
n

n 3) Proof of exemption under special law, if

applicable
n

n 4) Duly approved Tax Debit Memo, if applicable

Some



Questions???
Questions # 1

Who are required to file

Documentary Stamp Tax

Declaration Return?
 Who can file? Answer
n This return shall be filed in triplicate by the
following person making, signing, issuing,
accepting or transferring the document or facility
evidencing transaction:
n

n 1. Every natural or juridical person, resident or non-

resident, for sale, barter, exchange or other
onerous disposition of shares of stock in a
domestic corporation, classified as capital asset ,
not traded in the local stock exchange;
Who can file? Answer
2. Every withholding agent/buyer/seller on the


sale, transfer or exchange of real property

classified as capital asset .
n

 The “sale” includes pacto de retro sale and

other forms of conditional sale; and
n
Who can file? Answer
3. Every withholding agent/buyer/seller on the


sale, transfer or exchange of real property

classified as ordinary asset.


 Whenever one party to the taxable

document enjoys exemption from the tax
herein imposed, the other party thereto who is
not exempt shall be the one
 directly liable for the tax.
n
 Answer
a. In case of constructive affixture of documentary


stamps, by the persons making, signing, issuing,

accepting or transferring documents, instruments,
loan agreements and papers, acceptances,
assignments, sales and conveyances of the
obligation, right or property incident thereto
wherever the document is made, signed, issued,
accepted or transferred when the obligation or
right arises from Philippine sources or the property
is situated in the Philippines at the same time
such act is done or transaction had;
 Answer
b. By metering machine user who imprints the
Documentary Stamp Tax due on the taxable
documents; and
c. By Revenue Collection Agent, for remittance of

sold loose documentary stamps.

n

n Note: Wherever one party to the taxable

document enjoys exemption from the tax
imposed, the other party who is not exempt will
be the one directly liable to file Documentary
Stamp Tax Declaration and pay the applicable
stamp tax. Sec. 173
Questions # 2

Where and when

Documentary Stamp Tax

Declaration Return

be filed and pay?
When to file and pay?
-Answer
n The return shall be filed and the tax paid
within five (5) days after the close of the
month when the taxable document was
made, signed, issued,
 accepted or transferred.

 Where to File and Pay? - Answer
a. The return shall be filed with and the tax paid to
the Authorized Agent Bank (AAB) within the
territorial jurisdiction of the RDO which has
jurisdiction over the residence or principal place of
business of the taxpayer or where the property is
located in case of sale of real property or where
the Collection Agent is assigned.
b. In places where there is no Authorized Agent

Bank, the return will be filed with the Revenue

Collection Officer or
c. duly authorized City or Municipal Treasurer where

the taxpayer's residence or principal place of

business is located or where the property is
 Sec 200 (C) Where to File.
n Except in cases where the Commissioner otherwise
permits, the aforesaid tax return shall be filed
with and the tax due shall be paid through the
authorized agent bank within the territorial
jurisdiction of the Revenue District Office which
has jurisdiction over the residence or principal
place of business of the taxpayer. In places
where there is no authorized agent bank, the
return shall be filed with the Revenue District
Officer, collection agent, or duly authorized
Treasurer of the city or municipality in which the
taxpayer has his legal residence or principal
place of business.
Question # 3

Is the rule on

Documentary Stamp Tax

absolute?
Questions # 4

What are the documents/papers

not subject to

Documentary Stamp Tax?
 Answer
a. Policies of insurance or annuities made or
granted by a fraternal or beneficiary society,
order, association or cooperative company,
operated on the lodge system or local cooperation
plan and organized and conducted solely by the
members thereof for the exclusive benefit of each
member and not for profit .
b. Certificates of oaths administered by any

government official in his official capacity or

acknowledgement by any government official in
performance of his official duty
c. Written appearance in any court by any

government official in his official capacity

 Answer
d. Certificates of the administration of oaths to any
person as to the authenticity of any paper
required to be filed in court by any person or
party thereto, whether the proceedings be civil or
criminal
e. Papers and documents filed in court by or for the

national, provincial, city or municipal

governments
f. Affidavits of poor persons for the purpose of

proving poverty
 Answer
g. Statements and other compulsory information
required of persons or corporations by the rules
and regulations of the national, provincial, city or
municipal government exclusively for statistical
purposes and which are wholly for the use of the
Bureau or office in which they are filed, and not at
the instance or for the use or benefit of the
person filing them
h. Certified copies and other certificates placed

upon documents, instruments and papers for the

national, provincial, city or municipal
governments made at the instance and for the
sole use of some other branch of the national,
 Answer
i. Certificates of the assessed value of lands, not


exceeding P200 in value assessed, furnished by

the provincial, city or municipal Treasurer to
applicants for registration of title to land
n

n
Questions # 5

What are the implications

of failure to stamp

taxable documents?
 Answer
a. The untaxed document will not be recorded, nor


will it or any copy thereof or any record of transfer

of the same be admitted or used in evidence in
court until the requisite stamp or stamps have
been affixed thereto and cancelled
n

b. No notary public or other officer authorized to



administer oaths will add his jurat or

acknowledgment to any document subject to
Documentary Stamp Tax unless the proper
documentary stamps are affixed thereto and
cancelled.
SEC. 201. Effect of Failure to
Stamp Taxable Document.
n An instrument, document or paper which is
required by law to be stamped and which
has been signed, issued, accepted or
transferred without being duly stamped,
shall not be recorded, nor shall it or any
copy thereof or any record of transfer of the
same be admitted or used in evidence in
any court until the requisite stamp or
stamps are affixed thereto and cancelled.
n
 Form
n


Sample …

Refer to form.
 1) SEC. 1 7 3 . St a m p Ta xe s Up on
D ocu m e n t s,
Loa n Ag r e e m e n t s, In st r u m e n t s and
Pa p e r s.

Upon docum ent s, inst rum ent s, loan agreem ent s and
papers, and upon acceptances, assignments, sales and
transfers of the obligation, right or property incident thereto,
there shall be levied, collected and paid for, and in respect of the
transaction so had or accomplished, the corresponding
documentary stamp taxes prescribed in the following Sections of
this Title, by the person making, signing, issuing, accepting, or
transferring the same wherever the document is made, signed,
issued, accepted or transferred when the obligation or right
arises from Philippine sources or the property is situated in the
Philippines, and the same time such act is done or transaction
had:Provided, That whenever one party to the taxable document
enjoys exemption from the tax herein imposed, the other party
who is not exempt shall be the one directly liable for the tax.
n

n
SEC. 174. Stamp Tax on Debentures and
Certificates of Indebtedness.
n On all debentures and certificates of indebtedness issued by
any association, company or corporation, there shall be
collected a documentary stamp tax of One peso and fifty
centavos (P1.50) on each Two hundred pesos (P200), or
fractional part thereof, of the face value of such documents.
SEC. 175. Stamp Tax on Original Issue of
Shares of Stock.
n On every original issue, whether on organization, reorganization
or for any lawful purpose, of shares of stock by any
association, company or corporation, there shall be collected
a documentary stamp tax of Two pesos (P2.00) on each Two
hundred pesos (P200), or fractional part thereof, of the par
value, of such shares of stock: Provided, That in the case of
the original issue of shares of stock without par value the
amount of the
 documentary stamp tax herein prescribed shall be based
upon the actual consideration for the issuance of such shares of
stock: Provided, further, That in the case of stock dividends, on
the actual value represented by each share.
n
 SEC. 176. Stamp Tax on Sales, Agreements to Sell,
Memoranda of Sales, Deliveries or Transfer of Due-
bills, Certificates of Obligation, or Shares
of Certificates of Stock.
n On all sales, or agreements to sell, or memoranda of sale, or deliveries, or
transfer of due-bills, certificates of obligation, or shares of certificates of
stock in any association, company, or corporation, or transfer of such
securities by assignment in blank, or by delivery, or by any paper or
agreement, or memorandum or other evidences of transfer or sale
whether entitling the holder in any manner to the benefit of such due-
bills, certificates of obligation or stock, or to secure the future payment
of money, or for the future transfer of any due-bill, certificate of
obligation or stock, there shall be collected a documentary stamp tax of
One peso and fifty centavos (P1.50) on each Two undred pesos (P200)
or fractional part thereof, of the par value of such due-bill, certificate of
obligation or stock; Provided, That only one tax shall be collected on
each sale or transfer of stock or securities from one person to another,
regardless of whether or not a certificate of stock or obligation is issued,
indorsed, or delivered in pursuance of such sale or transfer: and,
Provided, further, That in the case of stock without par value the
amount of documentary stamp tax herein prescribed shall be equivalent
to twenty-five percent (25%) of the documentary stamp tax paid upon
the original issue of said stock.
SEC. 177. StampTax on Bonds, Debentures,
Certificate of Stock or
Indebtedness Issued in Foreign Countries.
n On all bonds, debentures, certificates of stock, or certificates
of indebtedness issued in any foreign country, there shall
be collected from the person selling or transferring the
same in the Philippines, such as tax as is required by law
on similar instruments when issued, sold or transferred
in the Philippines.
n
SEC. 178. Stamp Tax on Certificates of
Profits or Interest in Property or
Accumulations.
n On all certificates of profits, or any certificate or memorandum
 showing interest in the property or accumulations of any
association, company or corporation, and on all transfers of
such certificates or memoranda, there shall be collected a
documentary stamp tax of Fifty centavos (P0.50) on each Two
hundred pesos (P200), or fractional part thereof, of the face
value of such certificate or
 memorandum.
n
SEC. 179. Stamp Tax on Bank Checks,
Drafts, Certificates of Deposit not
Bearing Interest, and Other Instruments.
n 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).
n
SEC. 180. Stamp Tax on All Bonds, Loan greements,
promissory Notes, Bills of Exchange, Drafts, Instruments and
Securities Issued by the Government or Any of its
Instrumentalities, Deposit Substitute Debt Instruments,
Certificates of Deposits Bearing Interest and Others Not
Payable on Sight or Demand.
n On all bonds, loan agreements, including those signed abroad, wherein the
object of the contract is located or used in the Philippines, bills of exchange
(between points within the Philippines), drafts, instruments andsecurities
issued by the Government or any of its instrumentalities, deposit substitute
debt instruments, certificates of deposits drawing interest, orders for the
payment of
n any sum of money otherwise than at sight or on demand, on all promissory
notes, whether negotiable or non-negotiable, except bank notes issued for
circulation, and on each renewal of any such note, there shall be collected a
documentary stamp tax of Thirty centavos (P0.30) on each Two hundred
pesos (P200), or fractional part thereof, of the face value of any such
agreement, bill of exchange, draft, certificate of deposit, or note: Provided,
That only one documentary stamp tax shall be imposed on either loan
agreement, or promissory notes issued to secure such loan, whichever will
yield a higher tax: Provided, however, That loan agreements or promissory
notes the aggregate of which does not exceed Two hundred fifty thousand
pesos (P250,000) executed by an individual for his purchase on installment
for his personal use or that of his family and not for business, resale, barter
or hire of a house, lot, motor vehicle, appliance or furniture shall be exempt
from the payment of the documentary stamp tax provided under this Section.
n
 SEC. 181. Stamp Tax Upon Acceptance of
Bills of Exchange and
Others.
n Upon any acceptance or payment of any bill of exchange or
order for the
n payment of money purporting to be drawn in a foreign country
but payable in the
n Philippines, there shall be collected a documentary stamp tax of
Thirty centavos
n (P0.30) on each Two hundred pesos (P200), or fractional part
thereof, of the face
n value of any such bill of exchange, or order, or the Philippine
equivalent to such value,
n if expressed in foreign currency.
n
SEC. 182. Stamp Tax on Foreign Bills of
Exchange and Letters of
Credit.
n On all foreign bills of exchange and letters of credit (including orders, by
telegraph or otherwise, for the payment of money issued by express
or steamship companies or by any person or persons) drawn in but
payable out of the Philippines in a set of three (3) or more according
to the custom of merchants and bankers, there shall be collected a
documentary stamp tax of Thirty centavos (P0.30) on each Two
 hundred pesos (P200), or fractional part thereof, of the face value
of any such bill of exchange or letter of credit, or the Philippine
equivalent of such face value, if expressed in foreign currency.
n
SEC. 183. Stamp Tax on Life
Insurance Policies.
n On all policies of insurance or other
instruments by whatever name the same
may be called, whereby any insurance shall
be made or renewed upon any life or lives,
there shall be collected a documentary
stamp tax of Fifty centavos (P0.50) on each
Two hundred pesos (P200), or fractional part
thereof, of the amount insured by any such
policy.
n
 SEC. 184. Stamp Tax on Policies
of Insurance Upon Property.
n - On all policies of insurance or other instruments
by whatever name the same may be called, by
which insurance shall be made or renewed upon
property of any description, including rents or
profits, against peril by sea or on inland waters,
or by fire or lightning, there shall be collected a
documentary stamp tax of Fifty centavos (P0.50)
on each Four pesos (P4.00), or fractional part
thereof, of the amount of premium charged:
Provided, however, That no documentary stamp
tax shall be collected on reinsurance contracts
or on any instrument by which cession or
acceptance of insurance risks under any
 SEC. 185. Stamp Tax on Fidelity
Bonds and Other Insurance
Policies.
n On all policies of insurance or bonds or obligations of the
nature of indemnity for loss, damage or liability made or
renewed by any person, association, company or
corporation 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), and all
bonds,
 undertakings, or recognizances, conditioned for the
performance of the duties of any office or position, for the
doing or not doing of anything therein specified, and on all
obligations guaranteeing the validity or legality of any bond
or other obligations issued by any province, city, municipality,
or other public body or organization, and
 on all obligations guaranteeing the title to any real
estate, or guaranteeing any mercantile credits, which may be
 SEC. 186. Stamp Tax on Policies
of Annuities and Pre-Need Plans.
n - On all policies of annuities, or other instruments
by whatever name the same may be called,
whereby an annuity may be made, transferred or
redeemed, there shall be collected a
documentary stamp tax of One peso and fifty
centavos (P1.50) on each Two hundred pesos
(P200) or fractional part thereof, of the capital of
the annuity, or should this be unknown, then on
each Two hundred (P200) pesos, or fractional part
thereof, of thirty-three and one-third (33 1/3)
times the annual income. On pre-need plans, the
documentary stamp tax shall be Fifty centavos
(P0.50) on each Five hundred pesos (P500), or
 SEC. 187. Stamp Tax on
Indemnity Bonds.
n On all bonds for indemnifying any person, firm or
corporation who shall become bound or engaged
as surety for the payment of any sum of money
or for the due execution or performance of the
duties of any office or position or to account for
money received by virtue thereof, and on all
other bonds of any description, except such as
may be required in legal proceedings, or are
otherwise provided for herein, there shall be
collected a documentary stamp tax of Thirty
centavos (P0.30) on each Four pesos (P4.00), or
fractional part thereof, of
n the premium charged.
 SEC. 188. Stamp Tax on
Certificates.

n - On each certificate of damages or otherwise, and

on every certificate or document issued by any
customs officer, marine surveyor, or other person
acting as such, and on each certificate issued by
a notary public, and on each certificate of any
description required by law or by rules or
regulations of a public office, or which is issued
for the purpose of giving information, or
establishing proof of a fact, and not otherwise
specified herein, there shall be
 collected a documentary stamp tax of Fifteen
pesos (P15.00).
n
 SEC. 189. Stamp Tax on
Warehouse Receipts.
n - On each warehouse receipt for property held in
storage in a public or private warehouse or yard
for any person other than the proprietor of such
warehouse or yard, there shall be collected a
documentary stamp tax of Fifteen pesos
(P15.00):Provided, That no tax shall be collected
on each warehouse receipt issued to any one
person in any one calendar month covering
property the value of which does not exceed Two
hundred pesos (P200).
n
 SEC. 190. Stamp Tax on Jai-Alai,
Horse Racing Tickets, lotto or
Other
Authorized Numbers Games.

n - On each jai-alai, horse race ticket, lotto, or

other
n authorized number games, there shall be
collected a documentary stamp tax of Ten
centavos (P0.10): Provided, That if the cost of
the ticket exceeds One peso (P1.00), an
additional tax of Ten centavos (P0.10) on every
One peso (P1.00, or fractional part
n thereof, shall be collected.
n
 SEC. 191. Stamp Tax on Bills of
Lading or Receipts.
n - On each set of bills of lading or receipts (except
charter party) for any goods, merchandise or
effects shipped
n from one port or place in the Philippines to another
port or place in the Philippines (except on ferries
across rivers), or to any foreign port, there shall
be collected documentary stamp tax of One peso
(P1.00), if the value of such goods exceeds One
hundred pesos (P100) and does not exceed One
Thousand pesos (P1,000); Ten pesos (P10), if the
value exceeds One thousand pesos (P1,000):
Provided, however, That freight tickets covering
goods, merchandise or effects carried as
SEC. 192. Stamp Tax on Proxies.

n - On each proxy for voting at any election for

n officers of any company or association, or for
any other purpose, except proxies issued
affecting the affairs of associations or
corporations organized for religious,
charitable or literary purposes, there shall
be collected a documentary stamp tax of
Fifteen pesos (P15.00).
SEC. 193. Stamp Tax on Powers
of Attorney.
n On each power of attorney to perform any act
whatsoever, except acts connected with the
collection of claims due from or accruing to
the Government of the Republic of the
Philippines, or the
 government of any province, city or
municipality, there shall be collected a
documentary stamp tax of Five pesos (P5.00).
n
SEC. 194. Stamp Tax on Leases
and Other Hiring Agreements.

n - On each lease, agreement, memorandum, or

contract for hire, use or rent of any lands or
tenements, or portions thereof, there shall
be collected a documentary stamp tax of
Three pesos (P3.00) for the first Two
thousand pesos (P2,000), or fractional part
thereof, and an additional One peso (P1.00)
for every One Thousand pesos (P1,000)
 or fractional part thereof, in excess of the
first Two thousand pesos (P2,000) for each
year of the term of said contract or agreement.
n
 SEC. 195. Stamp Tax on
Mortgages, Pledges and Deeds
of Trust.
n On every mortgage or pledge of lands, estate, or property, real or personal, heritable or
movable, whatsoever, where the same shall be made as a security for the payment of
any definite and certain sum of money lent at the time or previously due and owing of
forborne to be paid, being payable and on any conveyance of land, estate, or property
whatsoever, in trust or to be sold, or otherwise converted into money which shall be and
intended only as security, either by express stipulation or otherwise, there shall be
collected a ocumentary stamp tax at the following rates: (a) When the amount secured
does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00). (b) On each Five
thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos
(P5,000), an additional tax of Ten pesos (P10.00). On any mortgage, pledge, or deed of
trust, where the same shall be made as a security for the payment of a fluctuating
account or future advances without fixed limit, the documentary stamp tax on such
mortgage, pledge or deed of trust shall be computed on the amount actually loaned or
given at the time of the execution of the mortgage, pledge or deed of trust, additional
documentary stamp tax shall be paid which shall be computed on the basis of the
amount advanced or loaned at the rates specified above: Provided, however, That if the
full amount of the loan or credit, granted under the mortgage, pledge or deed of trust
shall be computed on the amount actually loaned or given at the time of the execution
of the mortgage, pledge or deed of trust. However, if subsequent advances are made on
such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid
which shall be computed on the basis of the amount advanced or loaned at the rates
specified above: Provided, however, That if the full amount of the loan or credit, granted
under the mortgage, pledge or
n
 SEC. 196. Stamp tax on Deeds of
Sale and Conveyances of Real
Property. -
n On all conveyances, deeds, instruments, or writings, other than grants,
patents or original certificates of adjudication issued by the Government,
whereby any land, tenement, or other realty sold shall be granted,
assigned, transferred or otherwise conveyed to the purchaser, or
purchasers, or to any other person or persons designated by such
purchaser or purchasers, there shall be collected a documentary stamp
tax, at the rates herein below prescribed, based on the consideration
contracted to be paid for such realty or on its fair market value determined
in accordance with Section 6(E) of this Code, whichever is higher: Provided,
That when one of the contracting parties is the Government the tax herein
imposed shall be based on the actual consideration. (a) When the
consideration, or value received or contracted to be paid for such realty
aftermaking proper allowance of any encumbrance, does not exceed One
thousand pesos (P1,000) fifteen pesos (P15.00). (b) For each additional
One thousand Pesos (P1,000), or fractional part thereof in excess of One
thousand pesos (P1,000) of such consideration or value, Fifteen pesos
(P15.00). When it appears that the amount of the documentary stamp tax
payable hereunder has been reduced by an incorrect statement of the
consideration in any conveyance, deed, instrument or writing subject to
such tax the Commissioner, provincial or city Treasurer, or other revenue
 SEC. 197. Stamp Tax on Charter
Parties and Similar Instruments.

On every charter party, contract or agreement for the charter of any ship,
vessel or steamer, or any letter or memorandum or other writing between the
captain, master or owner, or other person acting as agent of any ship, vessel or
steamer, and any other person or persons for or relating to the charter of any such
ship, vessel or steamer, and on any renewal or transfer of such charter, contract,
agreement, letter or memorandum, there shall be collected a documentary stamp tax
at the following rates:
n (a) If the registered gross tonnage of the ship, vessel or steamer does not exceed one
thousand (1,000) tons, and the duration of the charter or contract does not
exceed six (6) months, Five hundred pesos (P500); and for each month or fraction
of a month in excess of six (6) months, an additional tax of Fifty pesos (P50.00)
shall be paid.
n (b) If the registered gross tonnage exceeds one thousand (1,000) tons and does not
exceed ten thousand (10,000) tons, and the duration of the charter or contract
does not exceed six (6) months, One thousand pesos (P1,000); and for each
month or fraction of a month in excess of six (6) months, an additional tax of One
hundred pesos (P100) shall be paid.
n (c) If the registered gross tonnage exceeds ten thousand (10,000) tons and the
duration of the charter or contract does not exceed six (6) months, One thousand
five hundred pesos (P1,500); and for each month or fraction of a month in excess
of six (6) months, an additional tax of One hundred fifty pesos (P150) shall be
paid.
n
2 ) File Separate tax returns
n A separate assessment allow each spouse to claim personal
tax relief of RM 8000 while a joint tax return allows one
spouse to claim a wife or husband relief of RM 3000
n

n Tax Deduction :
 Each spouse earning Taxable income can claim personal tax
relief of RM 8000 by filling separate tax returns.
n

n
3) Ask your employer to increase
your EPF contributions
n Contributions to the employees Provident Fund (EPF) by employers are
tax-exempt for the employees.
n
n To reduce your taxable income , ask your employer to reduce your EPF
monthly salary but increase your EPF contributions by the same
amount.
n
n Tax Deduction :
 The deductible amount from your taxable income is dependent on the
arrangement between you and your employer.
n
n For Mr A : Mr A agrees to takle monthly pay cut of RM 1000 for an
equivalent increase in his EPF contributions by his employer.At the
end of the year , he receives an additional RM 12000 in his pension
fund but his taxable income is reduced by the same amount.
n
n The tax saving that he makes is RM 2880 ( RM12000@24%)


n
n
4) Change your cash
remuneration to cash
reimbursement
n Fixed allowances given by your employer each month
for entertainment and housing or parking fees are
taxable at your tax bracket.
n Change this to a “ reimbursement “ based on receipt
and you are not taxed on the amount received.
n

n Tax Deduction :
 The deductible amount from your taxable income is
dependent on the arrangement between you and your
employer
n

n For Mr A : By Changing a yearly fixed allowance of RM

6000 to a reimbursement of the same amount and
supported by receipts , Mr A makes a tax saving of
RM1440 ( RM 6000@24%)
n
5) Ask for a company car
n A car given by your employer is regarded as a benefit-in kind ( BIK )
and taxable.
n
n However , a company car is advantageous for taxpayers because the
preset tax scale for cars is much lower than the actual cost of
buying and maintaining a car.
n
n According to the Public ruling for BIKs , the tax payer must pay RM
3600 in taxes every year, for a car worth RM 75000
n
n If the employer pays for fuel , the tax payer is taxed an additional RM
1200 for this BIK
n
n Tax deduction :
 Whether you benefit from a company car depends on the value of the
car and your current tax bracket. Do the calculations to ascertain your
tax deduction.
6) Make charitable contributions
n A gift of money to an approved charitable organisation entitles you to
a tax deduction for the amount given.
n
n From 2008 onward , this amount cannot exceed 7% of your aggregate
income.
n
n However Charitable donations that were made in 2007 are not subject
to this limit.
n
n Tax deduction :
 Up to 7% of your aggregate taxable income can be reduced with this
deduction.
n
n For Mr A : With his taxable income of RM 90000 , Mr A can make a
donation of RM 6300 .This deduction results in a saving of RM 1512
( RM 6300@24%)
7) Take Up postgraduate studies
n A relief of RM 5000 per year for any course of study at
the Master’s or doctorate level , the government
announced in 2007 Budget the widening of the scope
to all postgraduate studies.
n
n The course does not have to be done full time , but “
must be in an institution or professional body in
Malaysia recognised by the government or approved
by Minister of Finance
n
n Tax Deduction :
 RM 5000 per individual
n
n For Mr A : As he completes his master’s degree . Mr A
can enjoy tax saving RM 1200 from his taxable
income ( RM 5000@24%)
n
n
8) Read , Read , Read
n Starting from YA 2007 , taxpayers can claim a
personal tax deduction to RM 1000 for
purchase of books, journals , magazines and
other publications.
n
n To maximise this generous deduction ,
consider giving books as gifts.
n
n Tax Deduction : RM 1000 per individual
n
n For Mr A : With book purchases of RM 1000 Mr
A saves RM 240 ( RM 1000@24%)
9) Get Sporty
n You will get a deduction of RM 300 for each year of
assessment for the purchase of sports and exercise
equipment for any sports activities defined under the
Sport Development Act 1997 “
n

n Tax Deduction : RM 300 per individual

n

n For Mr A : By buying RM 300 worth of sports

equipment , Mr A makes a saving of RM 71 ( RM
300@24%)
10) Buy Life Insurance
n The maximum tax relief is RM 6000 a year for
premiums paid to an insurance company for
life Insurance or deferred annuity plans.
n

n This Limit is shared with your contributions to

the EPF, other employer schemes and
contributions under any written law relating
to widows or orphan pensions
n

n Tax deduction : RM 6000 per individual

( shared with your EPF contributions )
11) Take out a Medical or Education
policy
n You can claim deductions of up to RM 3000 a year for
education and medical insurance ( combined limit for
both )
n This includes medical coverage that is part of life
insurance policy( the limit for life insurance is in
move 10 )
n A policy of this kind can be written for you , your spouse
or your child.
n
n Tax deduction :
 RM 3000 per individual
n
n For Mr A :After acquiring an education policy for his
children , Mr A makes a saving of RM 720 ( RM
3000@ 24%)
12) Pay your parents’ medical
bills
n You are able to claim up to RM 5000 for
payments towards your parents’ medical
bills.
n

n Tax deduction :
 RM 5000 per individual
n

n For Mr A : By paying his parents’ medical bills ,

Mr A makes a saving of RM 1200 ( RM5000@
24%)
13) Medical
n Claim a deduction of up to RM 500 per tax year for a full medical
examination and RM 5000 for medical expenses for yourself,
spouse or child for serious disease.
n
n If you have also spent money on full medical in the same year, your
claim will be reduce the RM5000 available for serious disease.
n
n A separate tax reduction of up to RM5000 a year is given for necessary
basic supporting equipment for disabilities suffered by yourself
,spouse, children or parent
n
n Tax Deduction :
 RM 500 per individual for full medical check-up.
 RM5000 for serious diseases or basic supporting equipment
n
n For Mr A : He claimed for a full medical check-up .The deduction give
him of RM 120 ( RM 500@24%)
14) Pay Zakat
n If you are a muslim ,paying any amount in
zakat , fitrah or other obligation Islamic dues
will entitle you to a tax rebate.
n

n Tax deduction :
 The Amount of zakat that you pay
15) Buy a Computer
n A deduction of up to RM 3000 can be claimed
once every three years for the purchase of
computers , printers and bundled software .
n The similar i9ncentive given previously in the
form of a tax rebate was withdrawn with
effect from 2007
n

n Tax deduction : RM 3000 once every three

years.
n

n For Mr A : Getting a computer for RM3000

gives him a saving of RM 720 ( RM
3000@24%)
16) Hire a Tax Consultant
n Consider hiring a tax consultant to explore
ways your remuneration package can be
structured to maximise your tax savings.
n

n Those who are earning at least RM5000 every

month should be able to justify the cost of
hiring a tax adviser with their tax savings
n

n Tax saving : this is dependent on your

personal circumstances and the deal that
you negotiate with your employer.
Tax – Savvy Investments
n You may be looking at some investment this
year.
n

n There are savings to be made from certain

investments , from a tax point of view.
n

n However , some moves may be advantageous

if you fall into a higher tax bracket .
n

n Besides looking for tax-exempt investment ,

here are four investment moves to explore
17) Buy property valued below or at
RM250000
n Stamp duty must be paid on all property transactions
that involve a change of legal ownership.
n
n Last year’s budget ( 2008 ) announced a 50% stamp
duty exemption for the purchase of houses that do
not exceed RM250000
n
n The maximum tax savings that can be found here is
RM2000 ( for a house worth RM250000 )
n
n This exemption is only given for one house per
individual and applies to sale and purchase
agreement signed between September 2007 and
December 2010
18) Buy Similar property
n Similar property can be grouped together for income tax purposes.
n
n The IRB has indentified categories such as residential , commercial
and vacant land.
n
n If you own two property in the same category , you can reduce the
taxable profit made from one property with the loss, if any incurred
from the other.
n
n Property investors are also exempt from real property gains tax for all
disposals on on or after 1st April 2007.
n
n However , taxpayers who are trading property – buying and selling in
order to generate income – are liable to income tax.
n
n “ This exemption is meant for taxpayers who invest in property for a
passive income”
n
n Tax deduction :
 Taxable income received from renting out a property in a particular
grouping such as residential can be reduced if a loss was incurred by
another property in the same group.
 19) Buy shares ( page1 )
nInvest
n in dividend-yielding shares if your t ax bracket is
above 26%.
n
nAnnew single-t ier syst em w as est ablished under t he
nat ional Budget for dividends received by shareholders.
n
n Com panies pay t ax of 26% (YA2008) and shareholders
receive a net dividend t hat is exem pt from t ax and does
not need t o be filed w it h t he IRB “ Shareholders who fall
int o higher t ax bracket s [ higher t han 26%] are essent ially
[ get t ing a] saving on t he difference.
n
n“ The single-t ier dividends is int ended t o sim plify t he t ax
filing process for individuals,” says Chua Tia Guan,
execut ive direct or and head of t ax and financial planning at
Great Vision Wealt h Managem ent Sdn Bhd.
n
n“ In t he past , refunds had been slow. From now on, t here
is no need t o declare or apply for a refund. And as
corporat e t axes are falling, com panies will be able t o pass
on m ore profit s t o t heir shareholders [ in t he form of
dividends] ,” he says.
n
19) Buy shares ( page2)

n However, not all companies will go under the single-tier

system immediately as some of them might have
imputation tax credits left, which they can use till 2013.
n
n Shareholders who receive dividends from companies using the
imputation system will have to report the amount received
and claim a tax refund if his personal tax rate is lower than
the company’s tax rate (27% in YA2007, 26% in YA2006).
n
n Shareholders can identify the system used by the company as
it is stated in the dividend vouchers.
n
n Tax Deduction
 Your tax saving is the difference between your tax
bracket and 26% (the corporate tax rate). This is only
applicable to dividends given out by companies using the
single-tier system.
20) Invest in REITs
n You can go into real estate investment trusts ( REITS )if your tax
bracket above 15%.
n
n There are 11 REITs listed on the Main Board.
n
n The tax on dividends given out by these property-related investments
are taxed at 15% as compared to tax on dividend at 26% ( under
the new single –tier dividend system )
n
n Only tax brackets exceeding 15% would enjoy some tax savings by
investing in REITs
n
n Since the distributions received by individual taxpayers have been
subject to that 15% , the taxpayers are not required to declare the
amount in their tax return.
n
n Tax deduction:
 Your tax saving is the difference between your personal tax bracket
and 15%
Moves for Business
Owners
n The first rule that small-business
owners should implement with
regards to their taxes is to take it
seriously.
n Spend some time strategising for
your business activities to save
hundreds or thousands ringgit.
n Here are six
21) Maintain books and records from
Day 1
n Keep separate bank accounts for personal and business transactions
and establish a basic accounting system.
n
n The inland Revenue Board recognises business income on an accrual
basis .
n
n This means that as long as a transaction is completed, either a sale of
goods or a provision of service , its value is immediately treated as
business income and is taxable.
n
n However , unpaid transaction can be reduced your taxable income.
n
n Any expenses made fro the business can be deducted from the
business income.
n
n The General rule is that expenses can be deducted if it is wholly and
exclusively incurred in earning your business income.
n
n So Keep the receipts for all supplies that you buy for your business
n
n However there is no deduction for capital expenditure although some
22) Time the purchase and use of
your fixed assets
n Capital allowances are permitted for certain business assets
such as equipment , machinery , vehicles computers and
software.
n
n The amount of allowances permitted each year depends on
the category that asset falls into .( refer to Public Ruling No
2/2001 for the deductible rate of your assets.
n
n The first capital allowance is given for the accounting year in
which the asset was purchased and used by the business.
n
n If you are contemplating a purchase , try to do it before the
end of the accounting year, instead of just after , to claim
the capital allowance against your business income.
n
n If you are buying the asset with a hire-purchase loan,
allowance can only be claimed as and when repayments
are made to the lender.
n
23. Buys a company car
n If you are a sole trader or a partner in a business, any car or vehicle
that is used for business purposes can bring about tax deductions.
n
n “The business income is reduced by the car’s financing cost if you buy
the car on hire-purchase.
n
n You are also deduct a certain amount for capital allowances every
year,
n
n Before implementing this tax-saving technique, business owners must
identify a percentage of the car’s use that is for private activities.
n
n As there is no definite ruling on how to determine this proportion for
private use, business owners must apply a fair and reasonable
figure that can withstand scrutiny.
n
n “Estimating private mileage is an exercise that must be undertaken in
accordance to the facts on your actual usage.
n
n And remember to record all running expenses to make these
deductions,” says Thornton.
n
24. Hire your spouse or family
member
n An effective tax-saving strategy is to hire a spouse or family member.
n
n “For example, a husband who is a business owner can hire his wife.
The wife’s salary is tax deductible but you must be able to show
that she is doing something to earn it,
n
n In this situation, you would have to contribute to your wife’s
Employees Provident Fund (EPF) savings and that amount entitles
her to tax relief.
n
n Another option is to make your spouse or family member a partner in
your business.
n
n This allows you to divide the income made by the business between
the both of you.
n
n As a partnership has no tax liability, both partners are liable for tax for
the respective portion of business income that each earns.
n
n “By opting for separate tax assessments, a husband and wife who are
partners in a business can each claim individual tax relief.
25. Implement a process to ‘chase after’ unpaid
debts

n Unfortunately, small business owners can complete a sale or service but

might not receive payment, in full or in part.
n
n At the end of an accounting year, a debt, which is estimated to be wholly
or partly irrecoverable, can be deducted from your business income
and this lowers your tax bill.
n
n “Tax authorities tend to look closely at bad-debt write-offs and provisions
(for debts that are expected to be partly recoverable).
n
n So put in some effort to recover the debt before deeming it irrecoverable
and you must evaluate each debt separately.
n
n The process that you put in place to recover your unpaid debts should be
documented and any conclusion that you make should be supported
with documentation as well.
n
n For example, you must show why it it not cost effective to take legal action
against a customer.
n
n However, if you eventually recover bad debts that have been written off or
partially written off, you must include this amount in your taxable
income for the year that you received payment.
26. Dedicate a space in your home
office
n Working in your own house can result in tax deductions for the costs related to your
“home office”.
n
n This includes electricity, telephone bills, quit rent and service charges of apartments.
n
n The best way to claim for these deductions is to dedicate a room or place as the
working environment.
n
n “A dedicated area helps to identify expenses that are specifically for business purposes
and can be claimed in full.
n
n Items that are used by the business as well as personal use, such as electricity, must
be apportioned.
n
n One way to do so is on the basis of floor area.
n
n If the business owner pays rent for the working area, this expense can be deducted
from the business income.
n
n This applies to rent that is paid to a spouse who owns the home but is not involved in
the business.
n
n However, this is strategy is only effective if the spouse who is not involved in the
business is taxed at a low tax rate as rental received must be declared as taxable
income.
n
n If this is an appropriate strategy for the business owner, A tenancy agreement that
specifies rental for a specific part of the house at the prevailing market rate.