BIR Ruling No. 377-2020

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE

HsU BUREAU OF INTERNAL REVENUE

Quezon City

Sec.5 of R.A.8367:RMC 9-16 BIR Ruling No. 1265-18 BIR Ruling No. 1187-18

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RPP SAVINGS AND LOAN ASSOCIATION,INC

E.Rodriguez Jr.Avenue

Bagong Ilog,Pasig City

Attention: Mr. Felicito C. Cubil

President

Gentlemen:

This refers to your letter dated February 23, 201 1 requesting for exemption from the twenty

percent (20%) final withholding tax on the interest income derived from its bank deposits and

deposit substitutes pursuant to Section 5 of Republic Act (RA) No. 8367, otherwise known as the

"Revised Non-Stock Savings and Loan Act of 1997."

It is represented that RPP Savings and Loan Association, Inc. is a domestic corporation

duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No.

with Taxpayer's Identification No. (TIN) It is primarily organized to -

"engage in the operations of a non-stock savings and loan association; to

encourage industry, frugality and accumulation of savings among the members; to extend

loans to members and/or make investments in the securities of 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 prerogative and

privileges inherent in and granted to corporations and interest of its members."

RPP Savings and Loan Association, Inc. is likewise licensed by then Central Bank of the

Philippines under Certificate of Authority No. dated January 31, 1975 to operate under R.A.

No. 3779, as amended.

In reply, please be informed as follows:

Income Tax

Section 5 of RA No. 8367 provides that:

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"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.

Interest earnings on deposits of members with Associations, as well as the shares of its

members from the net income of the Associations shall be exempt from income tax."

Based on the foregoing, RPP Savings and Loan 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. 1187-18 dated September 10, 2018 and BIR Ruling No. 1265-2018 dated October 18, 2018)

However, any income derived by RPP Savings and 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 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 on the classification of its properties as capital or ordinary asset.

Gross Receipts Tax

Section 4 of Revenue Regulations (RR) No. 9-2004, as amended, implementing 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. Imposition of Gross Receipts Tax on Other Non-bank Financial

Intermediaries. - Gross receipts of other non-bank financial intermediaries (non-bank

financial intermediary not performing quasi-banking functions) doing business in the

Philippines shall be subject to GRT at rates and on items of income provided 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 financial leasing, on the basis of remaining maturities of the instruments from

which such receipts are derived:

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

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

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Thus, RPP Savings and Loan Association, Inc. is generally subject to GRT on income

derived from its operations, unless otherwise exempted under special rules.

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Documentary Stamp Tax

As provided under Section 5 of R.A. No.8367, a non-stock savings and loan association is

financial intermediary, is subject to Documentary Stamp Tax (DST) under the provisions of RR No. 13-2004 implementing Title VII of the National Internal Revenue Code of 1997, as amended, only exempt from income tax. Thus, RPP Savings and Loan Association, Inc., as a non-bank particularly on loan agreements, mortgages, pledges, foreclosures and sales, among others.

Moreover, pursuant to RR No. 9-2000, whenever RPP Savings and Loan Association, Inc. is one of the parties to a taxable transaction, it shall be responsible for the remittance of the DST

due regardless of who will bear the burden of paying the DST.

This ruling is being issued on the basis of the foregoing facts as represented. However, if

upon investigation, it will be disclosed that the facts are different, then this ruling shall be

considered null and void.

Very truly yours,

Meeeaula

CAESAR R. DULAY Commissioner of Internal Revenue

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K-1 gps(rpp slai)