Tax Liability of Rural Banks

April 20, 1960 BIR RULING NO. 186-60 The Regional Director BIR Regional District No. 5 San Pablo City S i r : This is in connection with your letter dated March 30, 1960 requesting the opinion of this Office on the question of whether or not rural banks whose net assets exceed P700,000 are liable for the payment of all taxes, charges and fees of whatever nature and description on the whole amount or only on the amount in excess of P700,000.00. The pertinent provisions of Republic Act No. 1097 otherwise known as the Rural Bank Act provides as follows: "All Rural Banks created and organized under the provisions of this Act, with net assets not exceeding seven hundred thousand pesos, shall be exempt from the payment of all taxes, charges, and fees of whatever nature and description." Pursuant to the abovequoted provisions of law, only rural banks organized under the provisions of Republic Act No. 1097 and whose net assets do not exceed P700,000, are exempt from tax. The moment the value of their net assets exceed P700,000 they become wholly taxable. The law does not grant tax exemption to rural banks whose net assets exceed P700,000. Accordingly, they are subject to tax on their entire business. In this connection, please be further informed that if the net assets of a rural bank decreases so that it no longer exceeds P700,000, it becomes exempt from tax pursuant to section 14 of Republic Act No. 1097. casia Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue