Dividends Paid to Members of An Exempt Non-Stock Savings and Loan Association

April 24, 1987 BIR RULING NO. 115-87 21 (c) (2) 000-00 115-87 Gentlemen : This refers to your letter dated January 8, 1987 requesting a ruling as to whether dividends paid to members of an exempt non-stock Savings and Loan Association is subject to 15% final withholding tax. In reply thereto, I have the honor to inform you that this Office has classified a non-stock savings and loan association as a mutual savings bank which is exempt from income tax, pursuant to Section 27(b) of the Tax Code. To be entitled to exemption, the association (1) has no capital stock represented by shares and (2) its earnings less only the expenses of operation, are distributable wholly among the depositors. (Sec. 26, Revenue Regulations No. 2). One of the powers of a non-stock savings and loan association is to allow members-depositors to participate in the profits of its savings and loan association on the basis of their deposits on the date dividends are declared. (Sec. 5(e), Republic Act No. 3779, as amended). adc From the foregoing provisions of the law and regulations, it seems clear that the profits of a non-stock savings and loan association distributed to its member-depositors are considered dividends. Such being the case, said dividends having been received by individuals from a domestic corporation are subject to a final tax at the rate of 15% in 1986; 10% effective January 1, 1987, 5% effective January 1, 1988; and 0% effective January 1, 1989. (Sec. 21(c)(2), Tax Code, as amended by Executive Order No. 37) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner