35% Corporate Income Tax Imposed on Rural Banks

May 17, 1990 BIR RULING NO. 088-90 24 (a) 245-89 088-90 Gentlemen : This refers to your letter dated January 12, 1990 requesting a ruling whether the Rural Bank of Unisan which has less than P30,000,000.00 net assets is liable to pay the 35% corporate income tax. You pointed out that Presidential Decree No. 2026 explicitly states that rural banks with net assets amounting to less than P30,000,000.00 are tax exempt. On the other hand, Executive Order No. 93 withdrew all tax and duty incentives subject to certain exceptions. In reply, please be informed that P.D. No. 2026 added paragraph (f) to the enumeration of several tax exemptions and privileges not abolished by P.D. No. 1955, in effect, restoring all tax exemptions and/or preferential tax treatment previously enjoyed by rural banks prior to their abolition by P.D. No. 1955 which took effect on October 15, 1984. P.D. No. 2026 is explicit that the tax exemption benefits which were restored by said decree shall apply only to rural banks whose net assets are less than P30,000,000.00 and the same shall only be enjoyed for a period of five (5) years from the date of its effectivity which is February 3, 1983 subject to further extension as may be recommended by the Minister of Finance. In other words, the restoration of the aforementioned tax exemption and/or preferential tax privileges shall be effective only from and after February 3, 1986. (Revenue Memorandum Circular No. 9-86 dated May 8, 1986). However, the said tax exemptions and/or preferential tax privileges of Rural Banks were again withdrawn by and upon the effectivity of Executive Order No. 93 on March 10, 1987. (BIR Ruling Nos. 077-87 and 182-87). In view thereof, effective March 10, 1987 Rural Banks are subject to the corporate income tax of 35% [Sec. 24(a), Tax Code]. Very truly yours, (SGD.) JOSE U. ONG Commissioner