The Bureau of Internal Revenue (BIR) has issued a circular declaring that the central bank, known as Bangko Sentral ng Pilipinas (BSP), is not a bank and therefore exempted from certain taxes such as gross receipts tax (GRT).

Revenue Memorandum Circular 65-2008, signed by former BIR commissioner Lilian B. Hefti, was issued to clarify BSP’s taxation status and the legal basis for imposing taxes or implementing tax exemptions for BSP.

In the memo, BIR has concluded that the BSP is not a bank or a non-bank financial intermediary performing quasi-banking functions. The most immediate implication for this decision is that the BSP is exempted from the GRT, also sometimes known as gross excise tax which is a sales tax.

BSP deputy governor Armando L. Suratos said the BIR memo is “live” even if Hefti is no longer BIR chief.

“The memo was a result of almost a year of consultations between the BSP and the BIR (and) we agree with them that BSP is not a bank,” said Suratos.

“The (circular) is still in placed.” He said the memo only clarified GRT status and not other taxes, such as value added tax (VAT) which the BSP still pays.

However BSP sources said the revenue circular creates confusion within the central bank because while the bureau issued the memo for purposes of clarifying BSP’s taxation status, it opened other arguments since one institution has declared it as not a bank after all.

For one, like a bank, the BSP accepts deposits and releases loans and as a regulatory body, its responsibilities include money, banking and credit. The BIR said that while BSP is not bank, it is engaged in banking activities as per its constitutional and statutory mandates but not for commercial
or business purposes.

BIR cites BSP’s own law or Republic Act No. 7653, which does not provide any rule of taxation, but it does note BSP’s “limited tax exemption.”

Based on Section 125 of the central bank act, the BSP will be exempt for a period of five years (from approval of the 1993 law) from all national, provincial, municipal and city taxes, fees, charges and assessments. The exemption covers BSP’s resources, receipts, expenditures, profits and income as well as all contracts, deeds, documents and transactions entered into by the BSP.