Over the past few years, there has been a notable increase in tax disputes and litigation concerning intercompany transactions. The Bureau of Internal Revenue (BIR), for instance, has become more vigorous in pursuing documentary stamp tax (DST) on intercompany advances.

It must be recalled that the DST takes the form of an excise tax. It is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments. The tax is paid by the person making, signing, issuing, accepting, or transferring the documents. However, whenever one party to the taxable document enjoys exemption from the tax, the other party who is not exempt shall be the one directly liable for the tax.

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