BIR Ruling

December 7, 1970 Mr. Luis Tirso Rivilla Chairman Philippine Deposit Insurance Corp. 3rd & 4th Floor, G & A Building 2503 Pasong Tamo Extension Makati, Rizal S i r : This refers to your letter of September 29, 1970 requesting information on the kind of taxes, and the basis for the computation of each kind of tax to which the Philippine Deposit Insurance Corp.(PDIC) is subject by virtue of its operations. It appears that PDIC was created under Republic Act No. 3591, as amended, with the following objectives: (a) to insure deposit liabilities of all insured banks up to P10,000 per depositor; (b) to assist banks which are in danger of closing by making loans to or purchasing assets of or making deposits in said insured banks when in the opinion of the Board of Directors the continued operations of such banks is essential to provide adequate banking service to the community; that it has a capitalization of P5 million appropriated from the General Fund to constitute a permanent insurance fund; that this fund is periodically increased by transfers of 40% of net assessment income and such other income as the PDIC may realize from its operations; that its sources of income are from (a) assessments, authorized by law at a rate not exceeding 1/12 of 1% of assessment base (current assessment rate is 1/18 of 1%), and (b) interest or investments; that its expenses are made up of operating expenses and insurance losses; and that its net assessment income is disposed of by the transfer of 40% of the same to capital account, and the other 60% to be credited pro-rata to the insured banks. The PDIC is not by any law or regulation exempt from the payment of taxes. Accordingly, like any other corporation engaged in the insurance business, it is subject to income tax on its net income earned or derived from all sources, within and without the Philippines in accordance with section 24(a) of the Tax Code as amended by Republic Act No. 5431. It is also subject to the 3% premium tax prescribed by Section 255 of the same Code on its net assessment income. It is furthermore subject to the basic and additional residence taxes. However, it is exempt from the documentary as well as the science stamp taxes pursuant to Section 14 of its charter; but it may be liable for said taxes due on other taxable documents or instruments to which it is a party. And generally, it may be stated that the corporation is subject to any and all other taxes prescribed by the Tax Code that may be due and payable on any other taxable transaction to which it is a party, such as the compensating tax on its importations. Very truly yours, CONDRADO P. DIAZ Acting Commissioner of Internal Revenue