BIR Ruling No. 465-11

November 25, 2011 BIR RULING NO. 465-11 Section 5 of Republic Act (R.A.) No. 8367; BIR Ruling No. 138-97 dated December 29, 1997 Bicol Teachers Savings and Loan Association, Inc. Rm. 203 PVLB Building 4 Penaranda Street Legaspi City Attention: Reparada B. Arana President Gentlemen : This refers to your letter dated 22 March 2011 requesting exemption from income tax and withholding tax on final interest on bank deposits pursuant to Section 5 of Republic Act No. 8367 otherwise known as the Revised Non-Stock Savings and Loan Association Act of 1997. It is represented that Bicol Teachers Savings & Loans Association, Inc. is a non-stock organization duly registered with the Securities and Exchange Commission under SEC Registration No. AN091-199644, dated 27 December 1991. In support of your request, you submitted your Articles of Incorporation and latest financial statements. In reply, please be informed that Section 5 of Republic Act (R.A.) 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." Based on the facts, as represented, this Office holds that pursuant to the above provision of law, the interest income derived by Bicol Teachers Savings & Loans Association, Inc. from its bank deposit and yield or any other monetary benefit from deposit substitutes shall be exempt from the 20% final withholding tax and interest income derived from a depositary bank under the expanded foreign currency system shall be exempt from the 7 1/2% final income tax imposed under Section 27 (D) (1) of the Tax Code of 1997, as amended by R.A. 9337. (BIR Ruling No. 138-97 dated December 29, 1997) 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 as null and void. HEDaTA Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue