BIR Ruling No. 238-15

July 9, 2015 BIR RULING NO. 238-15 RA 8763; BIR Ruling No. 002-2003 HomeCredit Mutual Building and Loan Association, Inc. 26/F Tower 1, Insular Life Corporate Center Insular Life Drive, Filinvest Corporate City 1781 Alabang, Muntinlupa City Attention: Ildefonso S. Del Rosario Vice-President Gentlemen : This refers to your letter dated February 20, 2012 requesting on behalf HomeCredit Mutual Building and Loan Association, Inc. (HomeCredit) , revalidation of its certificate of tax exemption pursuant to Section 20 (d) of Republic Act No. 8763, otherwise known as the "Home Guaranty Corporation Act of 2000." Documents submitted show that HomeCredit is a domestic mutual building and loan association duly organized and existing under the laws of the Philippines; that BIR Ruling No. 002-2003 dated February 12, 2003 was issued in favor of HomeCredit confirming its tax exempt status pursuant to RA 8763; and that the aforesaid tax exemption was subsequently modified by this Office in BIR Ruling No. DA-400-2003 dated November 6, 2003. In support of its claim, HomeCredit submitted documents evidencing the continued coverage of its housing loans under the Home Guaranty Corporation's guaranty program, to wit: 1. Certificate of Guaranty No. 2011-5267 covering mortgage receivables amounting to P10,967,983.50 with Official Receipt of the Republic of the Philippines No. 3868244 dated April 5, 2011 amounting to P139,619.30 evidencing payment of guaranty premium for the said coverage; 2. Certificate of Guaranty No. 2007-4187 covering mortgage receivables amounting to P2,161,113.56 with Official Receipt of the Republic of the Philippines No. 7465856 amounting to P24,852.81 evidencing payment of guaranty premium for the said coverage; 3. Certificate of Guaranty No. 2011-5352 covering mortgage receivables amounting to P3,382,234.62 with Official Receipt of the Republic of the Philippines No. 5511554 amounting to P24,280.95 evidencing payment of guaranty premium for the said coverage; and 4. Certification for the renewal of guaranty for the amount of P10,080,700.83 with Official Receipt of the Republic of the Philippines No. 8435822 amounting to P76,700.51 evidencing payment of guaranty premium for the said coverage. In reply thereto, please be informed that Section 20 (d) of R.A. No. 8763, otherwise known as the "Home Guaranty Corporation Act of 2000," provides for the exemption of the Building and Loan Associations, including their franchises, capital, reserves, surplus, and their loans, receipts and incomes, from all taxation provided that such associations are guaranteed by the Home Guaranty Corporation (the "Corporation"). The said provision reads, viz. : "Section 20. Building and Loan Associations. (a) In order to encourage the accumulation of savings and the financing of homes through the local mutual thrift institutions, the Corporation is authorized, under such rules and regulations as it may prescribe, to issue contracts of guaranty for the accounts of such building and loan associations in accordance with the best practices of known mutual thrift and home financing institutions. xxx xxx xxx (d) When guaranteed by the Corporation, such associations including their franchises, capital, reserves, surplus, and their loans, receipts, and incomes, shall be exempt from all taxation now or hereafter imposed by the Government." It is clear from the above-cited section that in order for associations like HomeCredit to enjoy the tax exemption privilege, it has to be guaranteed by the Home Guaranty Corporation by issuing contracts of guaranty with the former in accordance with the best practices of known in mutual thrift and home financing institutions subject to the limitations prescribed in Section 16 of R.A. No. 8763. Accordingly, since HomeCredit has indeed been guaranteed by the Corporation as a building and loan association, its franchises, capital, reserves, surplus, and their loans, receipts, and income shall continue to be exempt from all taxes imposed by the Government. It must be emphasized, however, that the tax exemption privilege is only for direct taxes covered by a valid, current and existing contract of guaranty issued by the Corporation. 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. DETACa Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue