BIR Ruling No. 274-2021

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Republic Act No.8367 Revenue Regulations No. 9-2004:

BIR Ruling No. 466-2014 No. 9-2016 and Revenue Memorandum Circular

Fort Bonifacio, Taguig City, 1634 Molave St., Naval Station Jose Francisco Philippine Navy Savings and Loan Association, Inc. OT-274 - 2 0 21 JUL 2 7 202t

Attention: TRUSTEE EUGENIO N. CLEMEN President and General Manager

Gentlemen:

benefit of its members is subject to gross receipts tax (GRT) under Revenue Memorandum Circular No. 09-2016. Savings and Loan Association, Inc. ("PNSLAI") for a confirmatory ruling on whether or not. a non-stock savings and loan association organized and operated exclusively for the mutual This refers to your letter dated April 5, 2021 requesting on behalf of Philippine Navy.

Loan Association (NSSLA) under Republic Act (RA) No. 8367. NS-093 in favor of PNSLAI authorizing the latter to operate as a Non-Stock Savings and Securities and Exchange Commission (SEC) under Company Registration No. . 000 and Certificate of Registration No. OCN corporation duly organized under the laws of the Philippines; that it is registered with the and that a Certificate of Authority was issued by the Bangko Sentral ng Pilipinas (BSP) on It is represented that PNSLAI with Taxpayer's Identification No. (TIN) dated August 30, 1994, is a

prerogatives and privileges inherent in and granted to corporations and to such savings and its primary purpose is to engage in the operations of a non-stock and non-profit savings and loan association in order to encourage industry, frugality and accumulation of savings among productive enterprises or in securities of the Government or any of its political subdivisions. instrumentalities or corporations; and generally to exercise and execute all the powers. loan associations, primarily for the benefit and interest of its members. the members; to extend loans to members and/or make investments in the securities of PNSLAI is organized as a non-stock and non-profit savings and loan association and

needs of households by providing long term financing for home building and development and for personal finance". Section 4 thereof provides that NSSLA" shall confine its (NSSLAs) as "a non-stock. non-profit corporation engaged in the business of accumulating the savings of its members and using such accumulations for loans to members to service the known as " An Act Providing for the Regulation of the Organization and Operation of Non. Stock Savings and Loan Associations" defines non-stock savings and loan associations In reply, please be informed that Section 3 of Republic Act (RA) No. 8367 otherwise

' Amended Articles of Incorporation of the Philippine Navy Savings & Loan Association, Inc. Page 1 of 3

CT - 2 7L -2 Zt JUL 2 7 2021

membership to a well-defined group of person and shall not transact business with the general public.

Section 4101S.1 of BSP Manual of Regulation for NSSLA enumerates membership for NSSLAs as a well-defined group which consist of employees, officers, and directors of one company, including member-retirees; government employees belonging to the same department, branch, office; including member-retirees; and; immediate members of the families of the abovementioned, up to the second degree of consanguinity or affinity Likewise, Section 4101S of the BSP Manual requires that a NSSLA shall accept deposit from and grant loans to its members only and shall not transact business with the general public.

to wit: R.A. No. 8367 also provides tax exemption to NSSLAs as provided under Section 5

Associations as well as the shares of its members from the net income of the Associations shall be exempt from income tax. for profit, regardless of the disposition thereof. is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code. Interest earnings on deposits of members with from payment of tax in respect to income it receives, including interest from any of its properties, real or personal, or any activity conducted on its deposits with any bank: Provided, however, that income derived "SECTION 5. TAX EXEMPTION. An Association shall be exempt

amended, i.e. tax on other NBFIs. the BSP Manual of Regulations. Hence, NSSLA is generally subject to_GRT on income imposed is under Section 122 of the National Internal Revenue Code (NIRC) of 1997, as tax, gross receipts tax and documentary stamp tax. The said RMC provides that NSSLAs are under the direct supervision and regulation of the Bangko Sentral ng Pilipinas (BSP) and, for regulatory purposes, they are classified as Non-Bank Financial Intermediaries (NBFIs) under derived from its operations, unless otherwise exempted under special rules. The GRT (RMC) No. 9-2016 was issued to clarify the taxability of NSSLAs for purposes of income Accordingly, Bureau of Intermal Revenue (BIR) Revenue Memorandum Circular

Other Non-Bank Financial Intermediaries Beginning January 1, 2004" defines NBFIs as Certain Provisions of Republic Act No.9238, Re-Imposing the Gross Receipts Tax (GRT) on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and follows: Relative thereto, Revenue Regulations (RR) No. 9-2004, entitled "Implementing

repurchase agreements, whether any of these means of obtaining funds from the public is done on a regular basis or only occasionally. assignment or similar instruments with recourse. trust certificates, or of of any kind for their own account, or through the issuance of certificates of whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them or otherwise coursed through them, either for their own account or for the account of others. This includes all entities regularly engaged in the lending of funds or purchasing of receivables or other obligations with funds obtained from the public through the issuance, endorsement or acceptance of debt instruments '2. 3. Non-bank Financial Intermediaries ---- shall refer to persons or entities

Ventures, Inc., G.R. No. 241697, July 29, 2019. the Supreme Court held that: Further, in the case of City of Davao and Bella Linda N. Tanjili Vs. Randy Allied

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CT- 274 - 2021 jUL 2 7 2021

"In order to be considered as an NBFI under the National Internal Revenue Code. banking laws. and pertinent regulations. the following must concur:

a The person or entity is authorized by the BSP to perform quasi. banking functions:

b. The principal functions of said person or entity include the for the account of others; and lending. investing or placement of funds or evidences of indebtedness or eguity deposited to them, acquired by them, or otherwise coursed through them. either for their ow'n account or

The person or entity must perform any of the following functions on a regular and recurring. not on an isolated basis. to wit:

I. Receive funds from one (1) group of persons. irrespective of equity securities: and make available/lend these fund to number, through traditional deposits, or issuance of debt or another person or entity, and in the process acquire debt or

2 Borrow against, or lend on. or buy or sell debt or equity Use principally the funds received for acquiring various equity securities. types of debt or eauity securities.

Securities.

members are accumulated to be utilized for the common benefit of the members by providing long term financing for home building and development and for personal finance. hand, RA No. 8367 and the BSP Manual of Regulations for NSSLA mandate that a NSSLA shall accept deposit from and grant loans to its members only and shall not transact business for the mutual benefit of its members. RA No. 8367 requires that all funds received from purchasing of receivables or obligations with funds obtained from the public. On the other with the general public. Not only that, NSSLAs must be organized and operated exclusively Clearly, the imposition of GRT is on NBFIs engaged in the lending of funds or

contemplated activities of a NBFI as defined by law and its rules and regulations. Iending activities is not warranted for as long as such transactions do not fall under the which obtains funds exclusively from its members and does not transact business with the general public, it is our considered view that GRT imposed under RMC No. 9-2016 on its Based thereon, since PNSLAI showed that it is a NSSLA, a non-profit organization.

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

Very truly yours. 8aw

K- Commissioner of Internal Revenue CAESAR R. DULAY 044221

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