OFW remittances and the exemption from documentary stamp tax

lorna patajo-kapunan1I am tempted to go on a barrage of statements against the indiscriminate opening of balikbayan boxes, but I will not go there. Much has been said about the topic and the Bureau of Customs has got a serious beating from our overseas Filipino workers (OFWs), who also, by the way, happened to be their “bosses” according to PNoy.

Much more compounding than the issue on balikbayan boxes is that of remittances, which comes to the country daily amounting to millions of dollars. According to the Bangko Sentral ng Pilipinas (BSP), OFWs around the world sent $26.92 billion (P1.20 trillion) to the Philippines last year, up 6.2 percent from $25.35 billion (P1.13 trillion) in 2013.

I came to know recently from a group of people with relatives working abroad that they are receiving remittances through money-transfer agencies. I was able to look at a very recent receipt and was surprised to actually see that the same is being subjected to documentary stamp tax (DST). The unsuspecting families of our OFWs think that this is still normal when it is certainly not.

A documentary stamp tax is a tax imposed on documents,
instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto. The amount of DST is fixed or based on the par or face value of the document or instrument. The bigger the amount, the bigger the DST.

OFW remittances used to be subject of DST. However, under Section 35 of Republic Act (RA) 8042, as amended by Section 22 of RA. 10022, or the Migrant Workers and Overseas Filipinos Act of 1995, the remittances of all overseas Filipino workers, upon showing of the same proof of entitlement by the overseas Filipino worker’s beneficiary or recipient, shall be exempt from the payment of DST. What is surprising is that certain money-transfer agencies do not even inquire from the recipient if the same is coming from an OFW. Obviously, there appears to be very little information on the exemption to some money transfer agencies. There might also be very little information campaign to our OFWs or their families that the said remittances are already exempted from DST.

Pursuant to the amendment
introduced by Section 22 of RA  10022, the Department of Finance has issued Revenue Regulation 1-2011 (RR 1-2011) concerning the tax exemption of the remittances from the OFWs and overseas contract workers (OCW). In RR  1-2011, it was clearly reiterated that the remittances of all OFWs, upon showing of the Overseas Employment Certificate, or valid Overseas Workers Welfare Administration (Owwa) Membership Certificate by the OCWs or OFW beneficiary or recipient, shall be exempt from the payment of DST as imposed under Section 181 of the National Internal Revenue Code of 1997, as amended. For this purpose, in addition to the original copy, a duplicate copy or a certified true copy of the valid proof of entitlement referred to above shall be secured by the OCW or OFW from the Philippine Overseas Employment  Administration or OWWA, which shall be held and used by his or her beneficiary in the availment of the DST exemption.

RR 1-2011 also provides that in case of OCWs or OFWs whose remittances are sent through the banking system, credited to beneficiaries or recipient’s account in the Philippines and withdrawn through an automatic teller machine, it shall be the responsibility of the OCW or OFW to show the valid proof of entitlement when making arrangement for his or her remittance transfers.

We are all in agreement in touting our OFWs as our modern day heroes. If we really view them as such, it becomes a moral and legal imperative that we accord them all their entitlements and exemptions provided under the laws.



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