BIR Ruling

September 8, 1971 Mr. F. E. Evangelista Office of the Legal Counsel Central Bank of the Philippines Manila S i r : This refers to your letter dated May 17, 1971 requesting opinion whether savings and loan associations as well as banks are subject to the 3% tax imposed by Section 195-A (not 195-B) of the Tax Code and, in the affirmative, whether the said 3% tax on their gross income will be borne by their borrowers. acd In reply, I have the honor to inform you that savings and loan associations organized as stock corporations under Republic Act No. 3779, which extend loans to the general public, are considered lending investors subject to the graduated annual fixed tax imposed in Section 182(A)(3)(dd) and to the 3% tax on their gross income in accordance with Section 195-A, both of the Tax Code, as amended by Republic Act No. 6110. (BIR Ruling No. 70-029, May 19, 1970). The 3% tax payable by said associations as lending investors is based on their gross income, which means the entire amount of interest and whatever fees charged to the borrowers in connection with the practice of lending money. There is no law or regulation prohibiting said associations from billing the said tax against their borrowers. However, the tax billed against their borrowers forms part of the gross income of the association for purposes of the 3% tax as lending investor. Banks are not subject to the 3% tax as lending investor because they are subject to the 5% bank tax on their gross receipts under Section 249 of the Tax Code. aisa dc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue