Katipunan Bank (ZN), Inc.

June 16, 2009 BIR RULING [DA-(C-091) 297-09] R.A. 7353; RR 16-93; DA-420-2004 Katipunan Bank (ZN), Inc. Quezon Ave., Miputak Dipolog City Attention: Bienvenida T. Alano President Gentlemen : This refers to your letter dated March 31, 2008, requesting for exemption from the payment of gross receipts, documentary stamp, value-added and capital gains taxes from December 19, 2007 to December 18, 2012, pursuant to Section 15 of Republic Act (R.A.) No. 7353, otherwise known as the Rural Banks Act of 1992. DHaECI From the documents submitted it appears that KATIPUNAN BANK (ZN), INC. (TIN 006-914-739) is registered with the Securities and Exchange Commission (SEC) on December 4, 2007 under SEC Registration No. CS200717379; that among its purposes are "to carry and engage in the business of extending rural credit to small farmers and tenants and to deserving rural industries or enterprises; to have and exercise all authority and powers, to do and perform all acts and to transact all business which may legally to had or done by rural banks organized under and in accordance with the New Rural Banks Act. (Republic Act No. 7353) as it exists or may be amended, and to do all other things incident thereto and necessary and proper in connection with said purpose within such territory, as may be determined by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP)"; and that the Monetary Board issued in December 2007 a Certificate of Authority to enable the bank to operate as a rural bank. In reply, please be informed that Section 15 of Republic Act No. 7353, as implemented by Revenue Regulations No. 16-93, 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." In addition, Section 2 (B) of the said Revenue Regulations provides, viz .: "SEC. 2. Taxes Covered by the Exemption . xxx xxx xxx B. Exemption from gross receipts tax. All rural banks are exempt from the tax (GRT) imposed under Section 119 of the NIRC (now Section 121 of the Tax Code of 1997), on gross receipts from sources within the Philippines." Such being the case, since KATIPUNAN BANK (ZN), INC. is an entity created and organized under R.A. No. 7353, it is entitled to all the exemptions provided in Section 15 of R.A. No. 7353, except the corporate income tax and local taxes, fees and charges. Accordingly, KATIPUNAN BANK (ZN), INC. is exempt from the payment of gross receipts tax imposed on banks and financial institutions pursuant to Section 121 of the Tax Code of 1997, as amended, and from documentary stamp tax for a period of five (5) years reckoned from December 2007. However, Section 173 of the Tax Code of 1997 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." (BIR Ruling Nos. DA-420-2004 dated August 4, 2004 and DA-425-2003 dated November 21, 2003) IcHTAa 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service