Tax Liabilities and Exemptions of Rural Bank of Alabang (Muntinlupa), Inc.

May 18, 1999 BIR RULING NO. 069-99 000-00-069-99 Lim Duran & Associates Unit 704 Goldhill Tower Condominium No. 5 Annapolis Street, Greenhills San Juan, Metro Manila Attention: Atty . Rodrigo A . Reyna Gentlemen : This refers to your letter dated August 20, 1998 requesting on behalf of your client, Rural Bank of Alabang (Muntinlupa), Inc., for a ruling as to whether or not it is exempt from the payment of documentary stamp tax due from the sale, exchange or disposition of acquired real property through mortgage foreclosure sale. It is represented that Rural Bank of Alabang (Muntinlupa), Inc. commenced operation as such rural bank upon the grant of Certificate of Authority by the Bangko Sentral ng Pilipinas on January 15, 1997; that on July 5, 1998, the auction sale of a foreclosed real property located in Muntinlupa City was held to which Rural Bank of Alabang (Muntinlupa), Inc. was the only and winning bidder; that the Certificate of Sheriff's sale was issued on August 6, 1998; that upon presentment for registration, Rural Bank of Alabang (Muntinlupa), Inc. was assessed by the Bureau of Internal Revenue (BIR) to pay the documentary stamp tax computed from August 6, 1998; and that in support of your request, you cited Section 15 of R.A. No. 7353, otherwise known as the Rural Banks Act of 1992, which provides as follows: "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 operations as of the date of approval 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 approval of this Act." In reply please be informed that pursuant to the aforequoted provision of law, the Rural Bank of Alabang (Muntinlupa), Inc. is subject to the payment of corporate income tax and local taxes, fees and charges, but is exempt from the payment of all other taxes, including documentary stamp tax imposed under Section 196 of the Tax Code of 1997 on the sale, exchange or disposition of real property through mortgage foreclosure sale but only for a period of 5 years from the date of commencement of its operations, which is from January 15, 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 thereto, who is not exempt shall be the one directly liable for the tax." Accordingly, since Rural Bank of Alabang (Muntinlupa), Inc. is exempt from the documentary stamp tax, the owner-mortgagor is the one liable for the payment of the documentary stamp tax due on said foreclosure sale. cdll 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, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue