BIR Ruling [DA-076-00]

February 2, 2000 BIR RULING [DA-076-00] Agricom Rural Bank, Inc . F. Santiago St., cor. A. Morales St. Sta. Maria, Bulacan Attention: Ms . Virginia M . Naguiat Assistant Manager Gentlemen : This refers to your letter dated July 1, 1998 requesting, in effect, for a ruling a to whether or not rural banks are exempt from the payment of documentary stamp tax pursuant to Section 15 of Republic Act No. 7353 otherwise known as the "Rural Banks Act of 1992." In reply, please be informed that Section 15, in relations to Section 20 and 21 of R.A. No. 7353, as implemented by Revenue Regulations No. 16-93 provides, viz: "SEC. 15. All rural banks created under its provisions and those already in operation as of the date of the approval thereof shall be exempt from the payment of all taxes, fees and charges of whatever nature and description, except the corporate income tax and local taxes, fees and charges, for a period of five (5) years from the date of commencement of operations" Based on the foregoing, all rural banks are exempt from payment of documentary stamp tax imposed under Section 175 of the Tax Code of 1997 on the original issuance of shares of stock to the stockholders within the next five (5) years from the date of commencement of operations. However, Section 173 of the Tax Code of 1997 provides that, "whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto, who is not exempt shall be the one directly liable for the tax." cdt Accordingly, since rural banks are exempt from the documentary stamp tax, the stockholders are the ones liable for the payment of the documentary stamp tax due on said certificates of stock to be issued by the former. (BIR Ruling No. 124-98 dated August 31, 1998) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)