Documentary Stamp Tax on Bills of Exchange, Drafts, and Letters of Credit: NIRC Sections 180 and 182

A bill of exchange or a letter of credit used in trade finance carries documentary stamp tax (DST) of ₱0.60 for every ₱200 (or fractional part) of its face value — under NIRC Section 180 if the instrument runs between two points within the Philippines, or Section 182 if it is a foreign bill of exchange or letter of credit drawn in but payable outside the Philippines. This rate, set when the TRAIN Law doubled most DST rates effective 2018, was not touched by the 2025 CMEPA reform, so it remains the current figure for anyone opening a letter of credit or dealing in bills of exchange today.

What counts as a bill of exchange or letter of credit for DST purposes #

A bill of exchange is a written, unconditional order by one party (the drawer) directing another (the drawee, often a bank) to pay a fixed sum, on demand or at a set future time, to a named payee or bearer — commonly used to finance the sale of goods across distances. A letter of credit is the banking instrument built on that same structure: a bank undertakes, at its customer’s request, to pay a beneficiary (typically an exporter) upon presentation of specified shipping and commercial documents. Both instruments move money conditioned on paper, not on immediate cash — which is exactly the category of instrument Title VII of the NIRC taxes as a documentary stamp, separate from an outright check or a straightforward loan agreement.

NIRC Section 180: domestic bills of exchange and drafts #

Section 180 taxes bills of exchange or drafts that run between two points within the Philippines — a distinct, narrower category than the foreign instruments covered by Section 182. The statute reads:

“SEC. 180. Stamp Tax on All Bills of Exchange or Drafts. — On all bills of exchange (between points within the Philippines) or drafts, there shall be collected a documentary stamp tax of Sixty centavos (₱0.60) on each Two hundred pesos (₱200), or fractional part thereof, of the face value of any such bill of exchange or draft.”

This ₱0.60-per-₱200 figure is the TRAIN Law (Republic Act No. 10963) rate, effective January 1, 2018, which doubled the ₱0.30-per-₱200 rate that Republic Act No. 9243 had set back in 2004. A domestic bill of exchange is a comparatively uncommon instrument in everyday Philippine business — most local payment instructions move as checks (Section 178) or ordinary bank transfers rather than formal bills of exchange — but it still surfaces in inter-branch bank settlements and some supplier-financing arrangements between Philippine counterparties.

NIRC Section 182: foreign bills of exchange and letters of credit #

Section 182 is the provision that actually governs trade-finance letters of credit — it taxes any foreign bill of exchange or letter of credit drawn in the Philippines but payable outside the country, issued in the customary set of three or more copies. Based on the operative clause commonly cited from Section 182:

“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 Sixty centavos (₱0.60) on each Two hundred pesos (₱200), or fractional part thereof, of the face value.”

Where a letter of credit is issued in a foreign currency — as most import/export letters of credit are, typically in US dollars — Section 182 requires converting the face value to its Philippine peso equivalent before applying the per-₱200 computation. A separate paragraph of Section 182 also taxes the acceptance or payment, within the Philippines, of a bill of exchange or payment order that was drawn in a foreign country but made payable here, at the same ₱0.60-per-₱200 rate — covering the mirror-image transaction where the Philippines is the payment point rather than the origin.

Did CMEPA change this rate? No — confirm the current rate applies #

The Capital Markets Efficiency Promotion Act (CMEPA, Republic Act No. 12214), effective July 1, 2025 and implemented through Revenue Regulations No. 19-2025, restructured DST on capital-market instruments but left Sections 180 and 182 untouched. CMEPA’s enacted amendments run to NIRC Sections 22, 24, 25, 27, 28, 32, 34, 38, 39, 42, 51, 52, 56, 57, 127, 149, 174, 176, 179, 190, 199, and 259 — cutting the DST rate on original share issuance (Section 174), foreign-issued bonds and certificates (Section 176), and debt instruments (Section 179) from 1% to 0.75%, and expanding the list of DST-exempt papers under Section 199. Bills of exchange, drafts, and letters of credit under Sections 180 and 182 are not among the sections CMEPA amended, so the ₱0.60-per-₱200 rate — the TRAIN-era figure, not a CMEPA figure — is the rate currently in effect. If your bank, freight forwarder, or compliance checklist quotes a different rate for a letter of credit, that is a signal to double-check the source rather than a sign this article is out of date; verify directly against BIR issuances before relying on it for a filing.

Rate comparison: Sections 178, 180, and 182 side by side #

Three separate NIRC provisions tax negotiable payment instruments, and the rate structure differs sharply between them — a flat peso amount for checks under Section 178, versus a percentage-of-face-value rate for bills of exchange and letters of credit under Sections 180 and 182. Confusing the two can significantly under- or over-state DST due, especially on a large-value letter of credit.

The gap is stark: a ₱1,000,000 check costs ₱3.00 in DST; a ₱1,000,000 bill of exchange or letter of credit of the same face value costs ₱3,000.00 — a thousand times more. The reason for the disparity is structural, not arbitrary: a check is presumed to be settled almost immediately (at sight or on demand), while a bill of exchange or letter of credit typically finances a transaction over weeks or months and is treated by the NIRC as closer to a credit instrument.

Worked example: DST on a USD 50,000 import letter of credit #

An importer opening a letter of credit for an inbound shipment computes DST by converting the foreign-currency face value to pesos, then applying the ₱0.60-per-₱200 rate under Section 182. Assume a Philippine importer asks its bank to open a letter of credit worth USD 50,000 to pay a foreign supplier for a container shipment, and the bank’s applicable conversion rate on the date of issuance is ₱58.00 to USD 1.00.

Because ₱2,900,000 divides evenly by ₱200, there is no fractional increment to round up in this example — but Section 182 taxes “each ₱200, or fractional part thereof,” so any face value that does not divide evenly is rounded up to the next full ₱200 bracket before multiplying by ₱0.60. The importer’s bank will typically compute and collect this ₱8,700 as part of the fees for opening the letter of credit, since the bank — as the party issuing the instrument — carries DST liability jointly with the importer under NIRC Section 173.

Filing: BIR Form 2000-OT, five-day deadline #

DST on a bill of exchange or letter of credit is reported and paid using BIR Form 2000-OT (Documentary Stamp Tax Declaration/Return — One-Time Transactions), due within five days after the close of the month in which the instrument was made, signed, issued, or accepted. For a letter of credit, this is usually handled by the issuing bank as part of its own DST compliance rather than filed separately by the importer, but the importer should confirm with its bank that the DST was actually remitted, since liability under Section 173 is joint and several — the BIR can pursue either party if the tax goes unpaid. See Documentary Stamp Tax (DST): What It Is and When BIR Form 2000 Applies for the general Form 2000 filing mechanics that also apply to a Section 180 or 182 instrument.

How this differs from DST on a loan agreement #

A letter of credit is not the same instrument as a loan agreement for DST purposes, even though both can finance the same underlying trade transaction — a letter of credit is a payment-and-documents mechanism taxed under Section 182, while a loan agreement or promissory note is a debt instrument taxed under Section 179. An importer that both opens a letter of credit with its bank and separately takes out a trade-finance loan to fund the transaction may owe DST under both provisions, on different bases and potentially at different rates, since Section 179 was adjusted by CMEPA to 0.75% while Sections 180 and 182 were not. See Documentary Stamp Tax on Loan Agreements and Promissory Notes for how the loan side of a similar trade-finance transaction is computed.

Frequently Asked Questions #

What is the documentary stamp tax rate on a letter of credit in the Philippines? #

Under NIRC Section 182, a foreign bill of exchange or letter of credit drawn in but payable out of the Philippines is subject to documentary stamp tax of ₱0.60 on each ₱200, or fractional part thereof, of the face value. If the letter of credit is denominated in a foreign currency, the tax is computed on the Philippine peso equivalent of that face value.

Is DST on a letter of credit the same rate as DST on a domestic bill of exchange? #

Yes. NIRC Section 180 (domestic bills of exchange and drafts, between points within the Philippines) and Section 182 (foreign bills of exchange and letters of credit) both carry a ₱0.60 per ₱200 (or fractional part) of face value rate. The distinction between the two sections is where the instrument is drawn and payable, not the tax rate itself.

Did CMEPA (RA 12214) change the DST rate on bills of exchange or letters of credit? #

No. CMEPA amended DST rates under NIRC Sections 174, 176, and 179 (shares of stock, foreign-issued bonds and certificates, and debt instruments), plus the list of DST-exempt papers under Section 199. It did not amend Sections 180 or 182, so the ₱0.60-per-₱200 rate on bills of exchange, drafts, and letters of credit — set when the TRAIN Law doubled DST rates effective 2018 — remains the current rate.

Who pays the documentary stamp tax on a letter of credit — the importer or the bank? #

Under NIRC Section 173, DST liability falls on whoever makes, signs, issues, accepts, or transfers the instrument, and that liability is joint and several among the parties. In practice, the bank issuing the letter of credit typically collects the DST from the applicant (the importer) as part of the fees for opening the letter of credit and remits it to the BIR.

How is DST different for a bank check versus a bill of exchange under the NIRC? #

A bank check, draft, or certificate of deposit not drawing interest, or a sight/demand order for payment, falls under NIRC Section 178 and carries a flat ₱3.00 documentary stamp tax per instrument, regardless of face value. A bill of exchange or draft that is not payable at sight or on demand falls under Section 180 (domestic) or Section 182 (foreign), and is taxed at ₱0.60 per ₱200 of face value instead — so a large bill of exchange can owe far more DST than a check of the same amount, and a small one can owe less.

Summary #

Bills of exchange and letters of credit sit under two related but distinct NIRC provisions — Section 180 for instruments running purely within the Philippines, Section 182 for foreign bills of exchange and letters of credit drawn here but payable abroad — and both carry the same ₱0.60-per-₱200-of-face-value rate, a figure CMEPA left unchanged even as it cut DST on shares, foreign-issued bonds, and debt instruments elsewhere in the Code. That rate structure makes DST on a sizable letter of credit meaningfully higher than DST on an equivalent-value check, so an importer budgeting for the cost of opening a letter of credit should compute it explicitly rather than assume it is negligible. File on BIR Form 2000-OT within five days after month-end, and confirm with your issuing bank that it has actually remitted the tax, since liability under Section 173 runs jointly to both parties.