BIR Ruling No. 317-14

August 11, 2014 BIR RULING NO. 317-14 R.A. 7353; Sec. 2 (B) of RR 16-93; BIR Ruling No. 443-2012; BIR Ruling No. 135-2012 Far Eastern Bank (A Rural Bank), Inc. Market Site, Brgy. 7 Dolores, Eastern Samar Attention: Cecilio M. Cruz Chairman of the Board Gentlemen : This refers to your letter dated 23 July 2012 requesting exemption from payment of gross receipts tax and documentary stamp tax pursuant to Sections 15, 20 and 21 of Republic Act (R.A.) No. 7353, otherwise known as the Rural Banks Act of 1992. It is represented that FAR EASTERN BANK (A RURAL BANK), INC., with TIN 007-948-126, is registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS201020984 dated 23 December 2010; that its principal office at Market St., Dolores, Eastern Samar 6817; that the purposes for its incorporation according to its Articles of Incorporation are: " To carry and engage in the business in extending rural credit to small farmers and tenants and to deserving rural industries or enterprises; to have and exercise all authority and powers, to do and perform all acts, and to transact all business which may legally be had or done by rural banks organized under and in accordance with Republic Act No. 7353 (Rural Banks Act of 1992) as it exists or may be amended and to do all other things incident thereto and necessary and proper in connection with said purposes within such territory, as may be determined by the Monetary Board of the Bangko Sentral ng Pilipinas "; that pursuant to Republic Act No. (R.A.) 7353 and to Monetary Board Resolution No. 771 dated 04 June 2010, a Certificate of Authority dated 28 July 2011 was issued granting FAR EASTERN BANK (A RURAL BANK), INC. authority to operate as a Rural Bank, subject to the applicable provisions of law and BSP rules and regulations; and that FAR EASTERN BANK (A RURAL BANK), INC. commenced its operation on 10 August 2011. cCaDSA In support of its application, FAR EASTERN BANK (A RURAL BANK), INC. submitted the following documents: 1) Original letter dated 29 July 2011 issued by BSP Central Applications and Licensing Group; 2) Certified true copy of BSP Circular Letter No. CL-2011-063 dated 26 August 2011; 3) Certified photocopy of BSP Certificate of Authority dated 28 July 2011; 4) Certified true copy of SEC Certificate of Incorporation; 5) Certified true copy of SEC Articles of Incorporation; 6) Certified true copy of SEC By-laws; and 7) Certified true copy of BIR Certificate of Registration. In reply thereto, please be informed that Section 15 of R.A. No. 7353, as implemented by Revenue Regulations No. 16-93, provides "Sec. 15. All rural banks created and organized under the provisions 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 local taxes, fees and charges, for a period of five (5) years from the date of commencement of operations. xxx xxx xxx" In relation thereto, Section 2 (B) of Revenue Regulations No. 16-93 provides: cACHSE "SEC. 2. Taxes covered by the Exemption . xxx xxx xxx B. Exemption from gross receipts tax . All rural banks are exempt from the tax (GRT) imposed under Section 119 of the NIRC (now Section 121 of the Tax Code of 1997) on gross receipts from sources within the Philippines. C. Exemption from documentary stamp tax . Rural banks are exempt from the documentary stamp taxes collectible under existing laws on any loan or transaction extended by them in an amount not exceeding fifty thousand pesos (P50,000) or such amount as the Secretary of Finance upon recommendation of the Monetary Board may prescribe as may be necessary to promote and expand the rural economy. c.1. Any city or municipal trial court judge in his capacity as notary public ex officio shall administer the oath to or acknowledge the instruments of any rural bank and its borrowers or mortgagors, free from all charges, fees and documentary stamp tax collectible under existing laws relative to any loan or transaction not exceeding fifty thousand pesos (P50,000). c.2. Any Register of Deeds shall accept from any rural bank and its borrower and mortgagors for registration, free from all charges, fees and documentary stamp tax collectible under existing laws any instrument, whether voluntary or involuntary relating to loans or transactions extended by a rural bank in an amount not exceeding fifty thousand pesos (P50,000)." 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. In view of the foregoing and considering that since FAR EASTERN BANK (A RURAL BANK), INC. is a corporation created and organized as a rural bank under R.A. 7353 and was issued a Certificate of Authority by the BSP to operate as such, it is entitled to all the exemptions provided in Section 15 of R.A. No. 7353, except the corporate income tax and local taxes, fees and charges. Accordingly, FAR EASTERN BANK (A RURAL BANK), INC. is exempt from the payment of gross receipts tax imposed on banks and financial institutions under Section 121 of the Tax Code of 1997, as amended, and from documentary stamp tax for a period of five (5) years reckoned from 10 August 2011. (BIR Ruling No. 443-2012 and BIR Ruling No. 135-2012) However, the bank's exemption from documentary stamp tax granted under the Act is subject to the provisions of Section 173 (Stamp Taxes upon Documents, Loan Agreements, Instruments and Papers) of the Tax Code which states that one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax. SCaITA This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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