Banks and Other Financial Institutions in the Process of Liquidation are Subject to Corporate Income Tax and Bank Tax

November 24, 1987 BIR RULING NO. 376-87 220-24 000-00 376-87 Gentlemen : This refers to your letter dated September 30, 1987 requesting a ruling as to whether banks and other financial institutions under liquidation are subject to the gross receipts tax and to income tax. It is represented that your department is currently undertaking the liquidation of closed banks and other financial institutions pursuant to Section 29 of R.A. No. 265, as amended, that in administering these financial institutions, you are pursuing a program of activities designed to convert into money the assets of said financial institutions preparatory to the eventual distribution of liquidation dividends to their creditors/claimants; that in the process of converting the assets into money, certain types of income/earnings are generated for the account of these financial institutions which are derived from the following sources: (1) collection of loans, discounts and advances; (2) sale of real and personal properties; (3) investment in government securities; (4) placement in certificate of time deposit; (5) income from rental/leased properties of the financial institutions and other sources of income. aisadc In reply, please be informed that when a corporation is dissolved, its affairs are usually wound up by a receiver or trustee in dissolution. The corporate existence is continued for the purpose of liquidating the assets and paying the debts, and such receiver or trustee stands in the stead of the corporation for such purposes. Any sales of property by them are to be treated as if made by the corporation for the purpose of ascertaining the gain or loss. (Sec. 59 Revenue Regulations No. 2) Such being the case, banks and other financial institutions which are in the process of liquidation are subject to the corporate income tax as well as to the bank tax under Sections 24 and 220 of the Tax Code, as amended. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner