Bureau of Internal Revenue, on January 12, 2016, issued Revenue Memorandum Circular (RMC) No. 9-2016 clarifying the tax perks of non-stock savings and loan associations for income, value-added and documentary stamp tax purposes.
As defined under Republic Act No. 8367 (Revised Non-Stock Savings and Loan Association Act of 1997), non-stock savings and loan association shall mean a non-stock, non-profit corporation engaged in the business of accumulating the savings of its members and using such savings for loans to members to service the needs of households by providing long term financing for home building and development and for personal finance. An association shall be exempt from payment of tax with respect to its income only, including interest on deposits with any bank, provided, however, that income derived from any of its properties or any activity conducted for profit, regardless of the disposition, is subject to the corresponding internal revenue taxes. Interest earnings on deposits of members with associations as well as shares of its members from the net income of the associations shall be exempt from income tax.
The BIR also tightens the rule that associations are generally subject to gross receipts tax on income derived from its operations which is 5% from interest, commissions, discounts, and all other items treated as gross income. Also, 5% will be collected on interest, commissions and discounts from lending activities’ as well as income from financial leasing, on the basis of remaining maturities of the instruments from which such receipts are derived with maturity of 5 years or less, 1% will be collected on instruments with maturity of more than 5 years.
BIR further clarifies that associations are still liable for documentary stamp taxes (DST) particularly on loan agreements, mortgages, pledges, foreclosures, sales and others. Whenever an association is one of the parties to a taxable transaction, it shall be responsible for the remittance of the DST due regardless of who will bear the burden of paying the DST.