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FOURTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
1 
8 
JUi. 30 j? 3 : :4 
S. B. No. 
Introduced by Senator Edgardo J. Angara 
EXPLANATORY NOTE 
The bill seeks to permanently exempt the sale, barter or exchange of shares of 
stock listed and traded through the local stock exchange from the documentary stamp tax 
or DST under the National Internal Revenue Code of 1997 (the “Tax Code”). Republic 
Act No. 9243, “An Act Rationalizing the Provisions on the Documentary Stamp Tax 
under the National Internal Revenue Code of 1997, as Amended, and for Other 
Purposes”, suspended for a period of five (5) years the imposition of the DST on the sale, 
barter or exchange of shares of stock listed and traded through the local stock exchange. 
The period of suspension of the DST will expire in March of 2009. 
Trading friction costs should be eliminated to attract foreign investments and 
encourage domestic trading activity. The Philippines ranks among the highest in the 
region in terms of trading friction costs given the high stock transaction tax of 0.50% 
imposed on the gross transaction value of trades through the Philippine Stock Exchange. 
At a time when the avowed objective is to stimulate economic activity in the market, any 
additional friction cost will provide a major disincentive against investments, thereby 
making our goal of enhancing liquidity and turnover in the stock market more difficult to 
achieve. 
A financial sector taxation study, Financial Sector Taxation Policy Discussion 
and Recommendations (Second Module)(“Fintax”), dated June 30, 2007 and prepared by 
Dr. Felipe M. Medalla, et. al., for the Capital Market Development Council contains the 
recommendation that the sale, barter or exchange of stocks listed in the stock exchange 
should be permanently exempted from DST in consideration of the following: (a) in a 
neutral tax system, transaction taxes (e.g., DST), including those not so named but having 
the same effect, are discouraged whereas consumption taxes, which encourage savings, 
are favored; and (b) “the Philippines has the highest transaction cost for transfers of 
shares as compared to Hong Kong, Thailand and Singapore” resulting in no improvement 
in the volume of transactions in the stock exchange. The Fintax study concluded that, in 
the absence of any movement in the stock exchange transactions, any abolition of taxes 
would improve stock exchange conditions at “little revenue loss”. 
Studies and simulations conducted by the Philippine Stock Exchange show that a 
re-imposition of the DST of P0.75 for every P200 par value on the secondary trading 
through the stock exchange of shares of stock will effectively result in investors paying 
an additional 8 to 11 basis points (charged on buyers) per trade in the stock exchange, 
given the DST to be collected in relation to the value traded through the stock exchange 
for the years 2005 to 2007. 
The urgent passage of the proposed measure is earnestly requested. 
EDGARD J. NGARA 
Senator 


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FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
'- 
7 
8 Jut 30 p J :ii 4 
Introduced by Senator Edgardo J. Angara 
AN ACT 
EXEMPTING FROM DOCUMENTARY STAMP TAX ANY SALE, BARTER OR 
EXCHANGE OF SHARES OF STOCK LISTED AND TRADED THROUGH THE 
STOCK EXCHANGE, FURTHER AMENDING FOR THE PURPOSE SECTION 
199 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS 
AMENDED BY REPUBLIC ACT NO. 9243, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Section 199 of the National Internal Revenue Code of 1997, as amended 
by Republic Act No. 9243, is hereby further amended to read as follows: 
"SEC. 199. Documents and Papers Not Subject to Stamp Tax. - 
The provisions of 
Section 173 to the contrary notwithstanding, the following instruments, documents and 
papers shall be exempt from the documentary stamp tax: 
(e) Sale, barter or exchange of shares of stock listed and traded through the local 
stock exchange [for a period of five (5) years from the effectivity of this Act]." 
SECTION 2. Implementing Rules and Regulations. - 
The Secretary of Finance shall 
promulgate and publish the necessary rules and regulations for the effective enforcement 
of this Act. 
SECTION 3. Separability Clause. - If any provision of this Act is held 
unconstitutional or invalid, all other provisions not affected thereby shall remain valid. 
SECTION 4. Repealing Clause. - All laws, decrees, executive orders, rules and 
regulations or parts thereof, which are inconsistent with this Act, are hereby repealed, 
amended or modified accordingly. 
SECTION 5. Effectivity. - 
This Act shall take effect fifteen (15) days €allowing its 
publication in the Official Gazette or in two (2) newspapers of general circulation. 
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Approved: