BIR Ruling No. 445-12

July 9, 2012 BIR RULING NO. 445-12 Section 27 (C) of the Tax Reform Act of 1997, as amended; and Section 38 of Republic Act No. 8291; BIR Ruling No. 477-11 Government Service Insurance System Financial Center, Pasay City, Metro Manila 1308 Attention: Atty. Apollo M. Escarez OIC, Financial Management Group Gentlemen : This refers to your letter dated May 3, 2012 requesting for a certification to the effect that the income of Government Service Insurance System (GSIS) from its investments in Investment Management Agreements with banks are exempt from income tax. In reply, please be informed that this Office takes due notice of Section 38 of Republic Act (RA) No. 8291 (Government Service Insurance System of 1997 n ) which provides: "SECTION 39. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the GSIS shall be preserved and maintained at all times and that contribution rates necessary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the GSIS and their employers. Taxes imposed on the GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding any laws to the contrary, the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges, or duties of all kinds . These exemptions shall continue unless expressly and specifically revoked and any assessment against the GSIS as of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed repealed, superseded and rendered ineffective and without legal force and effect. SIaHTD Moreover, these exemptions shall not be affected by subsequent laws to the contrary unless this section is expressly, specifically and categorically revoked or repealed by law and a provision is enacted to substitute or replace the exemption referred to herein as an essential factor to maintain or protect the solvency of the fund, notwithstanding and independently of the guaranty of the national government to secure such solvency or liability. xxx xxx xxx" (emphasis supplied) The tax exempt status of GSIS under RA No. 8291 was further reiterated in a subsequent law, RA 8424, otherwise known as the National Internal Revenue Code of 1997 (NIRC), as amended. Section 27 (C) of the NIRC, as amended, reads as follows: "SECTION 27. Rates of Income Tax on Domestic Corporations. xxx xxx xxx (C) Government-owned or Controlled Corporations, Agencies or Instrumentalities. The provisions of existing special or general laws to the contrary notwithstanding, all corporations, agencies, or instrumentalities owned or controlled by the Government, except the Government Service Insurance System (GSIS) , the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), and the Philippine Charity Sweepstakes Office (PCSO), shall pay such rate of tax upon their taxable income as are imposed by this Section upon corporations or associations engaged in a similar business, industry, or activity." (emphasis supplied) The afore cited provision of law was applied in BIR Ruling No. 477-11 dated December 5, 2011 wherein this Office confirmed the tax exempt status of GSIS. In view of the foregoing laws and prevailing BIR Ruling, this Office hereby certifies that the income of Government Service Insurance System (GSIS) from its investments in Investment Management Agreements with banks are exempt from income tax. aIAcCH Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes n Note from the Publisher. Copied verbatim from the official document. "Government Service Insurance System of 1997" should read as "Government Service Insurance System Act of 1997".