BIR Ruling [DA-400-03]

November 6, 2003 BIR RULING [DA-400-03] Castillo Laman Tan Pantaleon & San Jose The Valero Tower 122 Valero Street Salcedo Village Makati City Attention: Atty. Maria Victoria D. Sarmiento and Atty. Rochelle A. Dayaon Gentlemen : This refers to your letter dated May 16, 2003 requesting for modification of BIR Ruling No. 002-03 dated February 12, 2003, where this Office ruled that "xxx xxx xxx "It is clear from the above-cited section that in order for associations like Home Credit to be exempt from the payment of income tax, it has to be guaranteed by the Home Guaranty Corporation by issuing contracts of guaranty with the former in accordance with the best practices of known mutual thrift and home financing institutions subject to the limitations prescribed in Section 16 of R.A. No. 8763. Accordingly, since Home Credit has indeed been guaranteed by the Corporation as a building and loan association, its franchises, capital, reserves, surplus, and their loans, receipts, and income shall be exempt from corporate income tax prescribed in Section 27(A) of the Tax Code of 1997 pursuant to Section 20(d) of R.A. No. 8763." In the aforesaid letter, you stated that you specifically requested for confirmation of Home Credit's opinion that it is exempt from all national internal revenue taxes imposed by the National Government as provided in Section 20(d) of R.A. No. 8763; that however, the BIR, Law Division, came out with the above-cited ruling but merely recognized that Home Credit is exempt from corporate income tax under Section 27(A) of the Tax Code of 1997; that subsequently, the same Office came out with BIR Ruling No. DA043-03 dated February 19, 2003, involving the same issue, where it has granted a blanket exemption to the Tahanan Mutual Building and Loan Association involving the same provisions of law, particularly Section 20(a) and (d) of R.A. No. 8763, as implemented by Article 46 of its Implementing Rules, in relation to Section 16(f) of R.A. No. 580, otherwise known as the Home Financing Act, as amended; and that you want that the above-cited ruling be modified by specifically exempting Home Credit from the following taxes, viz : 1) Corporate income tax; 2) Value-added tax; 3) Final withholding taxes on interest income and deposit substitutes; 4) Documentary stamp taxes; 5) Capital gains tax; and 6) All other national internal revenue taxes as are or hereafter may be imposed and collected by the BIR. In reply thereto, please be informed that after a careful review of the laws and the above-cited rulings, particularly BIR Ruling No. 002-03 dated February 12, 2003 vis-a-vis BIR Ruling No. DA043-03 dated February 19, 2003 both in relation to Section 20(a) and (d) of R.A. No. 8763, this Office modifies its previous ruling that limits the tax exemption of Home Credit, which is guaranteed by the Home Guaranty Corporation, to corporate income tax prescribed in Section 27(A) of the Tax Code of 1997. This is so because of the clear and unambiguous provisions of Section 20(a) and (d) of R.A. No. 8763 that exempt building and loan association, when guaranteed by the Home Guaranty Corporation, including its franchises, capital reserves, surplus, and their loans, receipts and income, from all taxes now or hereafter imposed by the Government. AHDcCT While Executive Order No. 93 withdrew all tax and duty incentives granted to government and private entities, nevertheless Section 20(a) and (d) of R.A. No. 8763 should be treated as an exemption to said Executive Order under the non-impairment clause of the Constitution. WHEREFORE, this Office hereby modifies BIR Ruling No. 002-03 dated February 12, 2003 and confirms your client's, Home Credit, exemption from all taxes now or hereafter may be imposed by the Government including its franchises, capital reserves, surplus, and their loans, receipts and income. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group