Taxability of Savings and Loan Association

1970 BIR RULING NO. 029-70 Savings and Loan Association: Taxability of Under Section 4 of Republic Act No. 3779, as amended savings and loan associations may be organized as stock or non-stock corporations. Those organized as non-stock corporation confine their membership to a well-defined group of persons and do not transact business with the general public. They accept deposit from, and grant loan to, only their members. On the other hand, those organized as stock corporations are authorized to receive deposits from and extend loans to the general public, and in accordance with Section 6 of the law, such associations shall not have or carry upon their books for any person any demand, commercial or checking account, or any credits withdrawn upon the presentation of any negotiable check or draft and they are prohibited from advertising or representing themselves to the public as bank, whether commercial or savings or as a trust company. Such associations are empowered by Section 5 of the same Act to grant loans and charge interest within the limits allowed by law, and to invest their funds in any sound non-speculative enterprise, as well as in bonds, securities, and other obligations issued by the Government of the Philippines or any of its political subdivisions, instrumentalities or corporations including government owned or controlled corporations. From the import of the provisions of Republic Act No. 3997 as hereinabove stated, savings and loan associations organized as stock corporations which extend loans to the general public, are considered lending investors subject to the graduated annual fixed tax imposed in Section 182(A)(3)(d) and to the 3% tax on their gross income in accordance with Section 195-A, both of the Tax Code, as amended by Republic Act No. 6110. Such associations whether organized as stock or non-stock corporations are subject to the income and residence taxes.