BIR Ruling No. 480-14

December 3, 2014 BIR RULING NO. 480-14 Sec. 15 of RA 7353 otherwise known as Revenue Memorandum Circular No. 066-12 Country Builders Bank, Inc. 10 Gen. Luna St., Tuktukan, Taguig City Attention: Anna Liza B. Santiago Senior Vice President Gentlemen : This refers to your letter dated October 31, 2012 requesting for confirmation that COUNTRY BUILDERS BANK, INC. (A RURAL BANK), is tax-exempt pursuant to Section 15 of R.A. No. 7353, otherwise known as the Rural Banks Act of 1992. Documents submitted disclosed that COUNTRY BUILDERS BANK, INC. (A RURAL BANK) (CBBI for brevity), with TIN 008-363-724, is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS201215968 dated April 15, 2011; that it holds its principal office at 10 General Luna Street, Tuktukan, Taguig City; that the Securities and Exchange Commission registered on September 27, 2012 the consolidation of Country Rural Bank of Taguig, Inc. (CRBTI) and Builders Rural Bank, Inc. (BRBI), into "Country Builders Bank, Inc. (A Rural Bank)"; that the purposes for its incorporation according to its Articles of Incorporation are: "To carry and engage in the business of extending rural credit to small farmers and tenants and to deserving rural industries or enterprises; to have and 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; to sell, solicit or market insurance products and services as an insurance agent especially for microinsurance products issued by life and non-life insurance companies, authorized by the Insurance Commission and in accordance with Bangko Sentral ng Pilipinas Rules and Regulations; 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 October 31, 2012 granting authority to CBBI to operate as a rural bank pursuant to R.A. 7353 and Monetary Board Resolution No. 222 dated February 9, 2012; that per BSP Circular Letter No. CL-2012-080 dated November 13, 2012, CBBI started operating as a consolidated Rural Bank on November 5, 2012; that a Sworn Certification dated October 29, 2013 was issued by Senior Vice President Anna Liza B. Santiago certifying that BRBI, a constituent bank, had not availed of the incentives availed of the incentives under R.A. 7353; and in her letter dated July 24, 2014, she certified that the other constituent bank CRBTI has already availed of the incentives of the said law. CHDTEA 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, Revenue Memorandum Circular No. 066-12 states that: "II. Taxation of Rural Banks Formed Through Consolidation Rural banks formed through consolidation ("consolidated rural banks") of existing rural banks ("constituent rural banks") shall not be entitled to the tax exemption under Section 15 of Republic Act No. 7353 in cases when the constituent rural banks previously availed of this exemption. However, should any or both the constituent rural banks not be able to enjoy the tax exemption for the entire five (5)-year period, then the consolidated rural bank shall be entitled to the exemption for the remaining period. " (Emphasis Supplied) 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. Rural banks formed through consolidation may still enjoy the tax exemption for the entire period of five (5) years from the date of commencement of operations in case any or both of the constituent banks did not avail this exemption or for the remaining period in case it previously enjoyed the tax exemption under the said Act. In view of the foregoing and considering that one of the herein constituent banks (BRBI) that was consolidated into CBBI has not yet availed of the tax incentives under R.A. No. 7353, CBBI is entitled to all the incentives provided in Section 15 of R.A. No. 7353, except the corporate income tax and local taxes, fees and charges. Accordingly, CBBI, a consolidated 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 November 5, 2012. 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. 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