BIR Ruling No. 443-12

July 5, 2012 BIR RULING NO. 443-12 R.A. 7353; Sec. 2 (B) of RR 16-93; BIR Ruling No. 124-98; BIR Ruling No. 069-99; BIR Ruling No. 184-99 Advantage Bank Corp. (A Microfinance-Oriented Rural Bank) Stop Over Commercial Complex Mac Arthur Highway (Namkwang Road) cor. Gerona-Pura Road, Brgy. Abagon, Gerona, Tarlac Attention: Mr. Fernando M. Nicandro President Gentlemen : This refers to your letter dated September 19, 2011 requesting exemption from payment of gross receipts tax and documentary stamp tax pursuant to Sections 15, 20 and 21 of R.A. No. 7353, otherwise known as the Rural Banks Act of 1992. Documents submitted disclosed that ADVANTAGE BANK CORP. (A Microfinance-Oriented Rural Bank) ,with TIN 008-025-540-000, is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS201106282 dated April 15, 2011; that it holds its principal office at Stop Over Commercial Complex, Mac Arthur Highway (Namkwang Road) cor. Gerona-Pura Road, Brgy. Abagon, Gerona, Tarlac; that the primary purposes for its incorporation according to its Articles of Incorporation are the following: 1) To carry and engage in the business of extending rural credit to small farmers and tenants and to deserving rural industries or enterprises; and 2) To exercise all authority and powers, to do and perform all acts, and to transact all businesses 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 a Certificate of Authority was issued by the Bangko Sentral ng Pilipinas (BSP) on June 30, 2011 granting its authority to ADVANTAGE BANK CORP. (A Microfinance-Oriented Rural Bank) to operate as a microfinance-oriented rural bank pursuant to R.A. 7353 and Monetary Board Resolution No. 1480 dated October 21, 2010; that ADVANTAGE BANK CORP. (A Microfinance-Oriented Rural Bank) commenced official business on July 4, 2011; and that the following documents were submitted in support of this request: DTCAES 1. SEC Registration Certification inclusive of the Articles of Incorporation and By-laws; 2. Copy of the Certificate of Authority dated March 16, 2011 from BSP allowing registration of the bank's Articles of Incorporation and By-laws with the SEC; 3. Copy of the Certificate of Authority issued by BSP on June 30, 2011 granting authority to operate as rural bank under Monetary Board Resolution No. 1480 dated October 21, 2010; 4. Copy of Letter to BSP dated July 5, 2011 informing them that Advantage Bank Corp. commenced official business on July 4, 2011; and 5. Copy of BSP Circular Letter No. CL-2011-051 dated July 18, 2011 circularizing approval of the establishment and authority to operate granted to Advantage Bank Corp. 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: "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. SCETHa 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 ADVANTAGE BANK CORP. (A Microfinance-Oriented Rural Bank) 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. (BIR Ruling No. 124-98 dated August 31, 1998; BIR Ruling No. 069-99 dated May 18, 1999; BIR Ruling No. 184-99 dated November 24, 1999) Accordingly, ADVANTAGE BANK CORP. (A Microfinance-Oriented Rural Bank) 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 July 4, 2011. CSEHIa 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." (BIR Ruling No. 124-98 dated August 31, 1998; BIR Ruling No. 069-99 dated May 18, 1999) 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