Question & AnswerQ&A (KRI REVENUE REGULATION NO. 16-93)
The main purpose of Republic Act No. 7353 is to provide for the creation, organization, and operation of rural banks and to grant tax exemptions and other incentives to promote and expand the rural economy in the Philippines.
Rural banks are exempt from all taxes, fees, and charges of whatever nature except for corporate income tax and local taxes, fees, and charges. They are also exempt from gross receipts tax and documentary stamp tax on loans or transactions not exceeding fifty thousand pesos (P50,000).
Rural banks must pay a 35% corporate income tax under Section 24(a) of the NIRC, 20% final withholding tax on interest income from Philippine currency bank deposits, royalties from Philippine sources, creditable expanded withholding tax on real property transactions, capital gains tax on sales of shares and foreclosed properties, and other income taxes under Title II of the NIRC.
Rural banks are exempt from these taxes, fees, and charges for a period of five (5) years from the date of commencement of operations or from the date of approval of the Act for banks already operating as of April 2, 1992.
The date of commencement of operations means the date when the rural bank was registered with the Securities and Exchange Commission or the date when the Certificate of Authority to operate was issued by the Monetary Board, whichever is later. This date determines the start of the tax exemption period.
No. Rural banks are exempt from documentary stamp tax only on loans or transactions not exceeding fifty thousand pesos (P50,000). They are liable for documentary stamp tax on the portion of loan amounts exceeding P50,000.
They may be fined up to One thousand pesos (P1,000), imprisoned for up to one (1) year, or both, at the court's discretion, if they demand or accept fees or delay proceedings related to the acknowledgment or registration of rural bank loan documents that are exempt from charges.
Yes. Rural banks are withholding agents if they act as employers paying compensation income subject to withholding tax or if they make income payments subject to expanded withholding tax under the National Internal Revenue Code.
No. Rural banks acting as agents of PNB, LBP, or DBP in areas without bank offices are not exempt from taxes that their principal banks are subject to.
They are exempt from gross receipts tax (GRT) under Section 119 of the NIRC on gross receipts, and from documentary stamp taxes on loans or transactions not exceeding fifty thousand pesos, among other specified tax exemptions.