Request that Payment Made for Gross Receipts Tax be Applied to Other Taxes

November 24, 1999 BIR RULING NO. 184-99 R.A. 7353 204-184-99 Central Equity Rural Banks, Inc . 121 Don Placido Campos Avenue Dasmarias,Cavite Attention: Ms. Carisa M. Coderes Accountant Gentlemen : This refers to your letter dated October 20, 1997 requesting that the payment you have made for gross receipts tax for the months of June to September, 1997 in the amount of P38,937.81 be applied to other taxes that you still have to pay. It is represented that Central Equity Rural Bank, Inc. is a rural bank with business address at 121 Don P. Campos Avenue, Dasmarias, Cavite; that you are still new in business having been opened on March 14, 1997; that you have been paying gross receipts taxes for the past four months after you received a letter from the Rural Bankers Association of the Philippines stating that the exemption from paying gross receipts taxes is no longer applicable to rural banks; and that you found out that you are still exempted in the payment of taxes of whatever nature, except corporate income tax and local taxes, fees and charges. In reply, please be informed that Section 15 of Republic Act No. 7353 otherwise known as the Rural Banks Acts of 1992 provides, viz: "Sec. 15. All rural banks created and organized under the provisions of this Act shall be exempt from 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 operation 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 other local taxes, fees and charges for a period of five (5) years from the approval of this Act." hence, rural banks created and organized under the provisions of the said Act are exempt from the payment of all taxes, fees and charges for a period of five(5) years from the date of commencement of operations while all rural banks in operation as of the date of approval of said Act are exempt from the payment of all taxes, fees and charges for a period of five(5) years from April 2, 1992, the date of approval of said Act. Such being the case, Central Equity Rural Bank, Inc. is still exempt from the payment of all taxes, fees and charges for a period of five(5) years from the date of its commencement of operations on March 14, 1997. In view thereof and considering that your payment for gross receipts tax totaling to P38,937.81 covering the period June to September, 1997 was made believing that the exemption thereof is no longer applicable, the same can be considered as erroneous payment. In the case of UST Cooperative Store v. City of Manila, L-17133, Dec. 31, 1965, it was ruled that there is erroneous payment of taxes when a taxpayer pays under a mistake of fact as for instance in a case where he is not aware of an existing exemption in his favor at the time the payment was made." Such payments are held to be not voluntary and, therefore, can be recovered or refunded. While the general rule in this jurisdiction is not to allow the set off of taxes against taxes payable to the government, the Commissioner of Internal Revenue may grant the refund or credit of taxes erroneously or illegally received pursuant to Section 204(C) of the Tax Code of 1997. Such being the case, you may apply for the issuance of a Tax Credit Certificate from our Appellate Division which you may utilize for the payment of other taxes to which you are still liable, except withholding taxes. This ruling is being issued on the basis of the foregoing facts as represented. However, if it will be disclosed upon investigation 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