Acyatan & Co

December 28, 2007 BIR RULING [DA-692-07] DA 084-06 Acyatan & Co 12th Floor, The Columbia Tower Ortigas Avenue Mandaluyong City Attention: Mr. Antonio P. Acyatan Chairman Gentlemen : This refers to your letter dated October 23, 2007 stating that your client, Bangko Kabayan, Inc. (Bangko Kabayan), a rural bank, is a domestic corporation registered with the Securities and Exchange Commission (SEC) on August 2, 2007; that the purposes for which it is formed is to carry and engage in the business of extending financial services to farmers, fisherfolk, employees, entrepreneur, commercial, manufacturing, and industrial enterprises and to such other persons or entities that require financial intermediation; and to have and to exercise all authority and powers and to do and perform all acts and to transact all businesses which may legally be done by rural banks organized under and in accordance with the existing New Rural Bank's Act or Republic Act (R.A.) No. 7353, as it exist or as may be amended; and that to do all other things or acts incident thereto necessary and proper in connection with said purposes within such territory as may be determined by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP); that on August 14, 2007, the BSP through Governor Amando M. Tetangco, Jr. granted Bangko Kabayan a Certificate of Authority to operate as a rural bank pursuant to R.A. No. 7353 and Monetary Board Resolution No. 35 dated January 11, 2007; that the consequent registration of Bangko Kabayan was the result of the consolidation of Ibaan Rural Bank, Inc. and Banco de Jesus Rural Bank, Inc., both corporations authorized to engage in the business of banking under R.A. No. 7353; and that the consolidation of the two (2) corporations was evidenced by the amended Plan of Consolidation executed on March 22, 2007 and Amended Agreement and Articles of Consolidation executed on March 12, 2007 followed by a Supplemental Agreement to the Amended Agreement and Articles of Consolidation executed on June 19, 2007, whereby these constituent banks agreed to consolidate into a single corporation called Bangko Kabayan (A Rural Bank), Inc. Based on the foregoing representations, you now request for confirmation of your opinion that Bangko Kabayan, a rural bank, is exempt from payment of all taxes, fees and charges of whatever nature and description, such as gross receipts and documentary stamp taxes, for a period of five (5) years reckoned from August 14, 2007 pursuant to Section 15 of R.A. No. 7353, otherwise known as the Rural Bank Act of 1992. In reply thereto, please be informed that Section 15, in relation to Sections 20 and 21 of R.A. No. 7353, otherwise known as the "New Rural Bank Act" provides "Sec. 15. All rural banks created under its provisions and those already in operation as of the date of the approval thereof 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." In relation thereto, Section 2 (B) of Revenue Regulations No. 16-93 provides that all rural banks are exempt from the Gross Receipts Tax (GRT) imposed under Section 119 of the Tax Code of 1997 on gross receipt derived from sources within the Philippines. IN VIEW OF THE FOREGOING, this Office hereby confirms your opinion that since Bangko Kabayan is a rural bank and was issued a Certificate of Authority by the BSP to operate as such, it is entitled to all the exemptions provided in Section 15 of R.A. No. 7353 ( i.e., GRT and DST) from the commencement of its operation as a rural bank. 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. ESTaHC Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service