BIR Ruling [DA-425-03]

November 21, 2003 BIR RULING [DA-425-03] RA 7353 184-99 First Community Bank, Inc . No. 101 JP&D Heritage, Square Burgos Street, Bacolod City Attention: Mr. Lawrence D. Villanueva President Gentlemen : This refers to your letter dated April 23, 2003, requesting in behalf of your client First Community Bank, Inc. (FCBI"), for a confirmation of your opinion that your client is exempt from the payment of gross receipts tax imposed on banks and financial institutions pursuant to Section 121 of the National Internal Revenue Code from the date of its commercial operations up to 31 December 2002 and from VAT, now imposed on banks pursuant to Section 108 of the same Code from January 2003 up to 14 January 2004 when its tax exemption under Republic Act No. 7353 will lapse. It is represented that FCBI is a rural bank organized under the provisions of RA 7353; that it commenced its operations on 14 January 1999; that FCBI is registered with the Securities and Exchange Commission under SEC Reg. No. A1998-13961; and that it is your opinion that pursuant to the provisions of RA No. 7353, it is exempt from the payment of VAT (in lieu of GRT) which is neither considered corporate income taxes or local taxes, fees and charges; until 14 January 2004. In reply, please be informed that Section 15 of Republic Act No. 7353 otherwise known as the Rural Banks Acts of 1992 provides, viz: "Sec. 15. All rural banks created and organized under the provisions of this Act 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. All rural banks in operation as of the date of approval of this Act 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 approval of this Act." hence, rural banks created and organized under the provisions of the said Act are exempt from the payment of all taxes, fees and charges for a period of five (5) years from the date of commencement of operation while all rural banks in operation as of the date of approval of said Act are exempt from the payment of all taxes, fees and charges for a period of five (5) years from April 2, 1992, the date of approval of said Act. Such being the case, we hereby confirm your opinion that First Community Bank, Inc. is exempt from the payment of gross receipts tax imposed on banks and financial institutions pursuant to Section 121 of the National Internal Revenue Code from the date of its commercial operations up to 31 December 2002 and from VAT, now imposed on banks pursuant to Section 108 of the same Code from January 2003 up to 14 January 2004 when its tax exemption under Republic Act No. 7353 will lapse. 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. IcaEDC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group