BIR Ruling

December 3, 1976 5% Bank Tax This refers to your letter dated April 22, 1976 requesting information whether or not rural banks with net assets exceeding P1,000,000.00 and/or P3,000,000.00 are subject to the 5% bank tax prescribed in Section 249 of the Tax Code. In reply, I have the honor to inform you that Section 14 of Republic Act No. 720, as amended by Republic Act No. 5939 provides that: "SEC. 14. All rural banks created and organized under the provisions of this Act with net assets not exceeding one million pesos, excluding the counterpart capital subscribed and paid in by the Government under Sections seven and eight of this Act shall be exempt from the payment all taxes, charges and fees of whatever nature and description: Provided , however , That when the net assets of a rural bank exceed one million pesos, the taxes charges and fees shall be levied in the proportion that such excess bears to the said net assets: Provided , finally , That when the net assets of a rural bank exceed three million pesos, it shall pay all taxes fees and charges like any other bank." Pursuant to the above quoted provisions of law, rural banks with net assets not exceeding P1,000,000.00, excluding the counterpart capital subscribed and paid in by the Government are exempt from the payment of the 5% bank tax imposed in Section 249 of the Tax Code. However, rural banks with net assets exceeding P1,000,000.00 but not exceeding P3,000,000.00 shall be liable to the payment of the said bank tax only in proportion to that part of the net assets in excess of P1,000,000.00. And rural banks with net assets exceeding P3,000,000.00 shall be liable in full to the payment of the 5% bank tax prescribed in said Section 249 of the Tax Code.