BIR Ruling No. 303-2017

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

Section 5,RA No.8367 RMC No.9-2016

BIR Ruling No.233-14 BIR Ruling No. 460-14: BIR Ruling No.046-15

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Operations Building, Meralco Center Ortigas Avenue,Pasig City MERALCO EMPLOYEES SAVINGS & LOAN ASSOCIATION, INC.

Attention: LEONOR B.ACUAR

EVP/CEO

Gentlemen:

This refers to your letters dated July 25, 2016 and August 17, 2016, requesting on behalf of MERALCO EMPLOYEES SAVINGS & LOAN ASSOCIATION, INC., for revalidation of its tax exemption pursuant to Republic Act (RA) No. 8367. entitled, "An Act Providing for the Regulations of the Organization and Operation of Non-Stock Savings and Loan Association"

It is represented that MERALCO EMPLOYEES SAVINGS & LOAN ASSOCIATION,INC.with Taxpayer's Identification No.(TIN) 1S a corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. and that it has been issued with Certificate of Authority No. to operate as a non- stock savings and loan association by the Central Bank of the Philippines (now, Bangko Sentral ng Pilipinas).

In reply, please be informed as follows:

Income Tax

Section 5 of RA No. 8367 provides that:

"SECTION 5.Tax Exemption. - An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank; Provided, however. That income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the

corresponding internal revenue taxes imposed under the National Internal Revenue Code.

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well as the shares of its members from the net income of the Associations shall be exempt from income tax." Interest earnings on deposits of members with Associations, as

dated February 11, 2015 and BIR Ruling No. 460-14 dated November 13, 2014) ASSOCIATION, INC. shall be exempt from income tax with respect to income it receives. Also, interest income derived by it from its deposit and deposit substitutes are exempt from twenty percent (20%) final withholding tax. (BIR Ruling No. 046-15 Based on the foregoing, MERALCO EMPLOYEES SAVINGS & LOAN

LOAN ASSOCIATION, INC. from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the on the classification of its properties as capital or ordinary asset. applicable income tax and other internal revenue taxes imposed under National Internal Revenue Code of 1997, as amended. It is subject to the applicable income tax depending However, any income derived by MERALCO EMPLOYEES SAVINGS &

Gross Receipts Tax

Section 122 of the National Internal Revenue Code of 1997, as amended, provides for the imposition of Gross Receipts Tax (GRT) on Non-bank Financial Intermediaries. Section 4 of RR No. 9-2004 states that: Section 4 of Revenue Regulations (RR) No. 9-2004, as amended, implementing

bank Financial Intermediaries. - Gross receipts of other non-bank financial intermediaries (non-bank financial intermediary not performing guasi-banking functions) doing business in the Philippines shall be subiect to GRT at rates and on items of income provided "SECTION 4. Imposition of Gross Receipts Tax on Other Non-

hereunder:

(a) From interest, commissions, discounts and all

other items treated as gross income under the Code 5%

(b) On interests, commissions and discounts from lending activities as well as income from financia

instruments from which such receipts are derived: leasing, on the basis of remaining maturities of the

Maturity period is five (5) years or less --- 5%

Maturity period is more than five (5) years - 1%

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INC. is generally subject to GRT on income derived from its operations, unless Thus, MERALCO EMPLOYEES SAVINGS & LOAN ASSOCIATION

otherwise exempted under special rules.

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Documentary Stamp Tax

particularly on loan agreements, mortgages, pledges, foreclosures and sales, among association is only exempt from income tax.Thus,MERALCO EMPLOYEES SAVINGS & LOAN ASSOCIATION, INC., as a non-bank financial intermediary, is implementing Title VII of the National Internal Revenue Code of 1997, as amended. others. subject to Documentary Stamp Tax (DST) under the provisions of RR No. 13-2004 As provided under Section 5 of RA 8367, a non-stock savings and loan

transaction, it shall be responsible for the remittance of the DST due regardless of who SAVINGS & LOAN ASSOCIATION, INC. is one of the parties to a taxable will bear the burden of paying the DST. Moreover, pursuant to RR No. 9-2000, whenever MERALCO EMPLOYEES

However, if upon investigation, it will be disclosed that the facts are different, then this ruling shaft be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours,

yewauau

Commissioner of Internal Revenue CAESAR R. DULAY 007005

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