BIR Ruling

April 23, 1975 Messrs. Quiason, de Guzman, Makalintal and Veneracion Lawyers P. O. Box 274 Greenhills Rizal Gentlemen : This refers to your letter dated March 31, 1975 requesting opinion as to whether or not (a) an Investment Bank created under Presidential Decree No. 129, is exempt from all taxation on the interests it may receive on loans given by it and which are secured by mortgages insured by the Home Financing Commission, and (b) a private individual who extends a loan secured by a mortgage insured by the Home Financing Commission is likewise exempted for all taxation on the interests from the said loan. cdti In reply, I have the honor to inform you that as quoted in your letter, Section 23(c) of Republic Act No. 580, as amended by Republic Act Nos. 1557 and 5488, provides as follows: "(c) Interest accumulated by lending institutions on mortgages insured under the provisions of this Act shall be exempted from all taxation." An investment house or bank created under Presidential Decree No. 129 is a lending institution within the purview of Section 23(c) of Republic Act No 580, as amended. Consequently, interests derived by such investment house or bank on loans given by it and which are secured by mortgage insured by the Home Financing Commission, are exempt from taxation. However, considering that the aforequoted provision of the Home Financing Act used the term "lending institutions," a private individual who extends a loan secured by a mortgage even insured by the Home Financing Commission is not exempt from taxation on interests derived by him on such loan. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."