BIR Ruling No. 145-14

May 28, 2014 BIR RULING NO. 145-14 Sec. 5 of RA No. 8367; BIR Ruling No. 066-2014; BIR Ruling No. 452-2013; BIR Ruling No. 343-2013; BIR Ruling No. 328-2013; BIR Ruling No. 234-2013 Meralco Employees Savings and Loan Association, Inc. Operation Building, Meralco Center Ortigas Center, Pasig City 1605 Attention: Ernesto D. Iglesia General Manager Gentlemen : This refers to your letter dated 12 July 2013 requesting for the revalidation of the exemption of MERALCO EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC. from the twenty percent (20%) final withholding tax on interest income from deposit and deposit substitutes with a bank pursuant to Section 5 of Republic Act (RA) No. 8367. Documents submitted show that MERALCO EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC., with Taxpayer Identification Number (TIN) 001-053-869-000, is a corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. 962; that the purpose for which it is formed is " to foster, promote and cultivate the habit of thrift and savings among its members, and to that end, to engage in the operation of a non-stock savings and loan; to receive savings and time deposits and capital contribution from its members and to pay interest on said deposit at such rates as may be allowed by Central Bank rules and regulations; to extend loans to members and/or make investments in securities of the Government or any of its political subdivisions, instrumentalities or corporations "; and that MERALCO EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC., is authorized by the Bangko Sentral ng Pilipinas to operate as a Non-Stock Savings and Loan Association under Certificate of Authority No. C-051 dated 20 August 1970. In reply, please be informed that Section 5 of RA No. 8367, entitled " An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations ", provides, viz. : "SEC. 5. Tax Exemption . An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank; Provided, however, That income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code. "Interest earnings on deposits of members with Association, as well as the shares of its members from the net income of the Associations shall be exempt from income tax." aIcDCH Based on the foregoing, interest income derived by the MERALCO EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC. from its deposit and deposit substitutes are exempt from twenty percent (20%) final withholding tax. However, income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code of 1997, as amended. (BIR Ruling No. 066-2014 dated February 20, 2014; BIR Ruling No. 452-2013 dated November 27, 2013; BIR Ruling No. 343-2013 September 4, 2013; BIR Ruling No. 328-2013 dated August 8, 2013; and BIR Ruling No. 234-2013 dated June 27, 2013) 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue