Law Summary
Taxes Covered by Exemption
- Exemption applies to all rural banks created under the Act and those operational as of April 2, 1992.
- Exemption covers all taxes, fees, and charges except:
- Corporate income tax.
- Local taxes, fees, and charges.
- Corporate income tax liabilities include:
- 35% corporate income tax (Section 24(a), NIRC).
- 20% final withholding tax on specific interest income (Section 24(e)(1), NIRC).
- Creditable expanded withholding tax on property transactions (RMC 7-90).
- Capital gains tax on shares and foreclosure sales (Section 24(e)(2), NIRC; Revenue Memorandum Order No. 6-92).
- Other income taxes under Title II, NIRC.
- Gross receipts tax exemption under Section 119, NIRC.
- Exemption from documentary stamp tax for loans or transactions up to ₱50,000.
- Notary public services for rural banks' loans under ₱50,000 are free of charge.
- Registers of Deeds must accept documents related to these loans free from charges and documentary stamp tax.
Liability for Documentary Stamp Tax
- Documentary stamp tax applies to loan amounts exceeding ₱50,000.
- For consolidated mortgage assignments, DST applies only to the amount exceeding ₱50,000 on each mortgage.
- The person executing the document is liable for the tax.
- If one party is exempt, the other party must pay the tax.
Rural Banks Acting as Agents of National Banks
- Rural banks acting as agents of PNB, LBP, DBP in areas without branches are subject to tax if their principal banks are taxed.
- Such rural banks must follow accreditation guidelines as per Section 25 of the Act.
Rural Banks as Withholding Agents
- Rural banks act as withholding agents if they:
- Employ personnel subject to withholding tax on compensation.
- Make payments subject to expanded withholding tax to individuals or corporations.
- Comply with relevant NIRC sections and Revenue Regulations.
Liability of Judges and Registers of Deeds
- City or municipal trial court judges or Registers of Deeds demanding or accepting unauthorized fees related to rural banks' transactions are penalized.
- Penalties include fines up to ₱1,000, imprisonment up to one year, or both.
Period of Exemption
- Five-year exemption period for rural banks from all taxes except those specified in Section 2(A).
- For banks created after the Act, period counted from commencement of operations.
- For existing banks, period counted from April 2, 1992 (date of approval).
- Commencement date defined as registration date with SEC or issuance of authority to operate by the Monetary Board, whichever is later.
- Effective date of the Act is June 9, 1992, following official publication.
Repealing Clause
- All inconsistent regulations or orders contrary to these provisions are modified, amended, or revoked.
Effectivity of Regulations
- Regulations take effect 15 days after publication in a widely circulated newspaper.