BIR Ruling [DA-634-99]

November 11, 1999 BIR RULING [DA-634-99] Apex Rural Bank, Inc. Wawa, Balagtas, Bulacan Attention: Mr . Eduardo R . Monzones President Gentlemen : This refers to your letter dated July 1, 1998 requesting for exemption from the payment of documentary stamp tax imposed under Section 175 of the Tax Code of 1997; and as to whether you are required to comply with Revenue Memorandum Order No. 8-98. It is represented that Apex Rural Bank, Inc. (Apex) was organized in 1997 under Republic Act No. 7353, otherwise known as the Rural Bank Act of 1992. 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 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 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, Apex Rural Bank is exempt from the documentary stamp tax imposed under Section 175 of the Tax Code of 1997 on the original issuance of its shares of stock to the stockholders but only for a period of five (5) years from the date of commencement of its operations in 1997. 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, who is not exempt shall be the one 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 on said certificates of stock to be issued by the former. (BIR Ruling No. 124-98 dated August 31, 1998) LexLib Moreover, you have to comply with Item No. III (1) of revenue Memorandum Order No. 8-98 dated August 25, 1998 which provides, viz : "III. POLICIES AND GUIDELINES 1. All existing corporations shall file the Corporate Stock DST Declaration and the DST Return (BIR Form No. 2000), if applicable when DST is still due on the subscribed share issued by the corporation, on or before the tenth day of the month following publication of this Order." 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