BIR Ruling

September 21, 1971 2nd Indorsement Returned to Revenue Director, Revenue Region No. 6, Quezon City, the entire docket bearing on the proposed assessment in the amount of P1,281.70 as 5% bank tax surcharge and penalty for the period from January 1, 1968 up to June 30, 1968 against the Rizal Commercial Banking Corporation, 304 Quezon Blvd., Ext., Quezon City. acd It appears that upon investigation conducted by Revenue Examiner Pascual B. Caballero by virtue of Letter of Authority No. 399450 dated October 9, 1968 that the Bank derived its income from loans, fees on banking services made available to customers and such other income due from any other banking institutions; that interests on such loans are deducted and taken by the bank in advance; that the total of said interests taken in advance were not included as part of its gross receipts for purposes of the 5% bank tax, but were only declared as receipts on a month to month basis. Pursuant to Section 250 of the Tax Code, every bank, within 20 days after the end of each calendar quarter, shall make a true and complete return of the amount of gross income (gross receipts) derived during the preceding quarter and pay the tax due thereon. The total interests deducted and taken by the Bank in advance from the loans granted to its customers during a particular quarter forms part of the Bank's gross receipts for said quarter. Therefore, said interests should be declared for 5% bank tax purposes within 20 days after the end of such quarter. The practice of declaring said receipts on a month to month basis is clearly erroneous. In view of the foregoing, the proposed assessment in the amount of P1,281.70 as deficiency bank tax surcharge and penalty, is in order and should be given due course. He is further instructed to cause a similar investigation of all other banks following the same erroneous procedure of declaring their gross receipts to ascertain the correct bank tax liabilities due from them. aisa dc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue