BIR Ruling [DA-584-99]

October 6, 1999 BIR RULING [DA-584-99] Advance Bank, Inc. (Rural Bank) Tirona Highway, Habay Bacoor, Cavite Attention: Ms . Belen B . Reyes President Gentlemen : This refers to your letter dated August 4, 1998 requesting for exemption from the payment of registration fees and documentary stamp tax imposed under Section 175 of the Tax Code of 1997. LexLib It is represented that Advance Bank, Inc. (Rural Bank) is seeking registration with the Bureau of Internal Revenue (Trece Martires City, Cavite), which is currently pending because of an "inquiry on bank exemption"; and that it started commercial operations on December 13, 1998. In reply, please be informed that Section 15 of Republic Act No. 7353, as implemented by Revenue Regulations No. 16-93 provides that: "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 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 the 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 the Act." Based on the foregoing, rural banks are exempt from the payment of registration fees and 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 for a period of 5 years from the start of its commercial operations on December 13, 1998. However, Section 173 of the same Code 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." 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) llcd 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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group