BIR Ruling

March 24, 1973 MEMORANDUM FOR: The Revenue Operations Head (Assessment) This refers to your Memorandum dated February 19, 1973 inquiring whether the Central Bank of the Philippines, the Government Service Insurance System and the Social Security System are subject to income tax. Central Bank of the Philippines The Central Bank is still exempt from income tax, pursuant to Section 130 of Republic Act No. 265 (Central Bank Act) which provides: "SEC. 130. Tax exemptions . The Central Bank of the Philippines shall be exempt from all national, provincial, municipal and city taxes and assessments now in force or hereafter established. cdta The exemption authorized in the preceding paragraph of this section shall apply to all property of the Central Bank, to the resources, receipts, expenditures, profits and income on the Bank, as well as to all contracts, deeds, documents and transactions related to the conduct of the business of the Bank: Provided , however , That said exemptions shall apply only to such taxes, and assessments for which the Central Bank itself would otherwise be liable, and shall not apply to taxes of assessments payable by persons or other entities doing business with the Central Bank." The above-quoted provision which states that the Central Bank shall be exempt from all taxes and assessments now in force or "hereinafter established" precluded the imposition against the Bank of any tax which may hereafter be prescribed by law. Accordingly, the provisions of Section 21(d) of the Tax Code, inserted by Republic Act No. 5431, which took effect on June 27, 1968 requiring all corporations, agencies, or instrumentalities owned or controlled by the Government to pay income tax upon their taxable income does not apply to the Central Bank. Government Service Insurance System The Government Service Insurance System is still subject to income tax in accordance with Section 24(d) of the Tax Code. In fact, the Legal Department has taken action on a report submitted by the Financing, Real Estate & Transfer Taxes (Audit) Division which covers the result of its investigation on the income tax liability of the System for the fiscal years 1968-1969 and 1969-1970. The docket of this case was returned to the said Division for recomputation of the tax liabilities of the System based on the ruling prepared by the Legal Department. Thereafter, the case will be referred to that Department for issuance of the assessment based on the recomputation submitted. Social Security System The Social Security System, like the Government Service Insurance System is also subject to income tax in accordance with Section 24(d) of the Tax Code, as inserted by Republic Act No. 5431. However, Section 16 of Republic Act No. 1161 otherwise known as "the Social Security Act of 1954" has been amended by Presidential Decree No. 24 dated October 19, 1972 to read as follows. "SEC. 16 Exemption from tax, legal process and lien . All laws to the contrary notwithstanding, the SSS and all its assets, all contributions collected and all accruals thereto and income therefrom as well as all benefit payments and all papers or documents which may be required in connection with the operation or execution of this Act shall be exempt from any tax, assessment, fee, charge, or customs or import duty; and all benefit payments made by the SSS shall likewise be exempt from all kinds of taxes, fees or charges, and shall not be liable to attachment, garnishment, levy or seizure by or under any legal or equitable process whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the covered employee to the SSS."(Emphasis ours) Under the above-quoted provision, the SSS is now exempt from the payment of income tax. This, therefore, repeals that portion of Section 34(d) of the Tax Code insofar as it holds that the SSS is subject to income tax. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue