BIR Ruling No. 443-11

November 11, 2011 BIR RULING NO. 443-11 Sec. 5 of RA No. 8367; BIR Ruling No. 138-97; BIR Ruling No. DA-234-98; BIR Ruling No. DA-029-04 SM Savings and Loan Association, Inc. SM Corporate Office, Building D J.W. Diokno Boulevard Mall of Asia Complex Pasay City Attention: Mr. Roque A. Lim President Gentlemen : This refers to your letter dated October 13, 2010 requesting for a re-confirmation that the interest income derived by SM Savings and Loan Association, Inc. from its bank deposits and yield or any other monetary benefit from deposit substitutes is exempt from the 20% final withholding tax imposed under Section 27 (D) (1) of the Tax Code of 1997 in relation to Section 5 of Republic Act (RA) No. 8367. In reply thereto, please be informed that Section 5 of RA No. 8367 provides that "SEC. 5. Tax Exemption. An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank: Provided, however, That income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code. Interest earnings on deposits of members with Associations as well as the shares of its members from the net income of the Associations shall be exempt from income tax." It is undisputed that interest income derived by SM Savings and Loan Association, Inc. from its bank deposits and yield or any other monetary benefit from deposit substitutes is exempt from the 20% final withholding tax imposed under Section 27 (D) (1) of the Tax Code of 1997. Thus, this Office had already occasioned to rule on the matter, when it said in BIR Ruling No. DA-234-98 dated June 10, 1998 , as follows: ADaEIH ". . . interest income derived by SM Savings and Loan Association, Inc. from its bank deposit and yield or any other monetary benefit from deposit substitutes are exempt from the 20% final withholding tax imposed under Section 27(D)(1) of the Tax Code of 1997." SUCH BEING THE CASE, this Office reiterates its stance that the interest income derived by SM Savings and Loan Association, Inc. from its bank deposit and yield or any other monetary benefit from deposit substitutes is EXEMPT from the 20% final tax under Section 27 (D) (1), supra . 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue