BIR Ruling [DA-275-99]

May 12, 1999 BIR RULING [DA-275-99] Air Materiel Wing Savings and Loan Association, Inc. Corner Boni Serrano and 18th Avenues, Murphy, Cubao, Quezon City 1109 Attention: Ltc. Ricardo L. Nolasco Jr., PAF Chairman and President Gentlemen : This refers to your letter dated March 18, 1998 requesting for exemption from the twenty percent (20%) final withholding tax on interest income from deposit and deposit substitutes with a bank in the light of the provision of Section 5 of Republic Act No. 8367, approved an October 21, 1997 and which took effect on November 14, 1997. Documentary evidence submitted disclosed that the Air Materiel Wing Savings and Loan Association, Inc. is a non-stock savings and loan association organized and registered with the Securities and Exchange Commission (SEC); and that it receives income and maintains deposits with various banks. In reply, please be informed that Section 5 of Republic Act No. 8367 entitled "An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations", provides, viz: "Sec. 5. Tax Exemption . An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank; Provided, however, that income derived from any of its properties, real or personal or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code." Based on the foregoing, Air Materiel Wing Savings and Loan Association, Inc. is therefore, exempt from payment of tax on the income it receives and on the 20% final withholding tax imposed upon interest on currency bank deposits. Provided, however, that income derived from any of its properties, real or personal or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code. [Sec. 5, R.A. 8367] effective November 14, 1997. On the other hand, interest earnings on deposits of members with the Association, as well as the shares of its members from the net income of the Association shall be exempt from income tax. [BIR Ruling No. 138-97 dated December 29, 1997] CTaSEI This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)