Non-Stock Savings and Loan Association (NSSLA) BIR Tax Exemption Under RA No. 8367

A Non-Stock Savings and Loan Association (NSSLA) organized under Republic Act (RA) No. 8367 is exempt from BIR tax on the income it receives, including interest on its own bank deposits, and its members’ interest earnings and net-income shares are likewise tax-exempt — but income the Association earns from its own properties or from any activity conducted for profit is not covered and stays fully taxable. The exemption is narrower than many NSSLAs and their members assume, and the BIR has issued guidance specifically to correct that assumption.

What is an NSSLA, and why does it get special tax treatment? #

A Non-Stock Savings and Loan Association is a non-stock, non-profit corporation organized under RA No. 8367, the Revised Non-Stock Savings and Loan Association Act of 1997, built specifically to pool members’ savings and relend those funds to the same members — most commonly for home building, home development, and general personal finance. Because an NSSLA exists to serve its own membership rather than to generate profit for outside shareholders, RA No. 8367 gives it a tax treatment closer to a cooperative than to a commercial bank or a stock savings and loan company: certain income tied directly to the member-savings-and-loan function is tax-exempt, while income from unrelated or for-profit activity is not.

What does Section 5 of RA No. 8367 actually exempt? #

Section 5 of RA No. 8367 exempts an Association from tax on the income it receives, expressly including interest earned on its own bank deposits, and separately exempts members’ interest earnings on their Association deposits and their share of the Association’s net income — but it draws a hard line at income from the Association’s own properties or from any activity conducted for profit. The statute reads:

“An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank: Provided, however, That income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code.”

— Section 5, Republic Act No. 8367 (the Revised Non-Stock Savings and Loan Association Act of 1997)

Read together with the section’s further provision that “interest earnings on deposits of members with Associations, as well as the shares of its members from the net income of the Associations, shall be exempt from income tax,” Section 5 sets up two exempt income streams — the Association’s own bank-deposit interest, and its members’ own interest and net-income shares — and one explicit non-exempt category: property income and for-profit activity income, taxed the same way any other corporation’s would be.

Why did the BIR issue RMC No. 9-2016? #

Revenue Memorandum Circular No. 9-2016 tightened the BIR’s own administrative reading of the RA No. 8367 exemption, reiterating that the law shields only the specific income items it names — not an NSSLA’s income generally — and clarifying exposure to gross receipts tax and documentary stamp tax on transactions the exemption doesn’t reach. In practice, this means an NSSLA cannot treat every peso that flows through the Association as automatically tax-free simply because the entity itself is organized under RA No. 8367. An Association that leases out part of its building to a commercial tenant, for example, is earning property income squarely inside the taxable carve-out Section 5 itself describes — regardless of what the Association ultimately does with that rental income, since the statute’s “regardless of the disposition thereof” language forecloses an argument that channeling the profit back into member services somehow restores the exemption.

Does an NSSLA still register with, and file returns to, the BIR? #

Yes — a partial income exemption does not exempt an NSSLA from BIR registration, bookkeeping, official receipt/invoice requirements, or annual and quarterly return filing. An Association still secures a Certificate of Registration, keeps books of accounts, and files an income tax return disclosing both its exempt interest income and any taxable property or for-profit income — the same general obligation that applies to other partially tax-exempt entities under the NIRC, such as cooperatives filing under RA No. 9520. Failing to file, on the theory that “we’re a tax-exempt association,” is a common and costly misreading of what RA No. 8367 actually grants.

Worked example: an NSSLA with mixed exempt and taxable income #

Bahay Ko Savings and Loan Association, an NSSLA registered under RA No. 8367, reports the following for a taxable year:

Bahay Ko’s ₱1,200,000 in bank-deposit interest and its members’ ₱3,500,000 in savings interest and ₱2,000,000 net-income share all fall inside the RA No. 8367 exemption. The ₱900,000 in commercial rental income does not — it is property income the statute expressly carves out, and the Association reports and pays the corresponding income tax (and, where applicable, VAT or percentage tax) on that amount just as any ordinary lessor would.

Frequently asked questions #

What is a Non-Stock Savings and Loan Association (NSSLA)? #

An NSSLA is a non-stock, non-profit corporation organized and regulated under Republic Act No. 8367, the Revised Non-Stock Savings and Loan Association Act of 1997, engaged in accumulating the savings of its members and using those funds to extend loans to members — typically for home building, home development, and personal financing needs.

Is an NSSLA’s income exempt from BIR tax? #

Partially. Section 5 of RA No. 8367 exempts an Association from tax on the income it receives, including interest on its bank deposits, and exempts members’ interest earnings on their deposits and their share in the Association’s net income. Income from the Association’s own properties or from any activity conducted for profit remains subject to the corresponding internal revenue taxes.

Does an NSSLA still need to register with the BIR and file returns? #

Yes. Exemption from a specific tax on qualifying income does not exempt an NSSLA from BIR registration, bookkeeping, invoicing, and return-filing obligations generally — including filing an income tax return reporting both exempt and any taxable income, consistent with how the BIR treats other Section 30-type exempt entities.

What did RMC No. 9-2016 change about NSSLA tax treatment? #

RMC No. 9-2016 tightened the BIR’s administrative reading of RA No. 8367’s exemption, reiterating that only the specific income items the statute names — interest on the Association’s bank deposits and members’ interest/net-income shares — are exempt, and that income from an NSSLA’s properties or for-profit activities, along with gross receipts tax and documentary stamp tax exposure on non-exempt transactions, is not shielded by the law.

Does the NSSLA exemption cover VAT or gross receipts tax as well as income tax? #

No blanket exemption applies. RA No. 8367’s exemption language is framed around income tax on specific interest income; other taxes — such as gross receipts tax on an Association’s non-exempt financial transactions, VAT/percentage tax on non-exempt activities, and documentary stamp tax on instruments the Association executes — are assessed under their own applicable rules unless a separate exemption independently applies.

Summary #

RA No. 8367 gives a Non-Stock Savings and Loan Association a real but narrow tax exemption: interest the Association earns on its own bank deposits, plus members’ own interest earnings and net-income shares, are exempt from income tax, while income from the Association’s property or from any for-profit activity is not — a distinction the BIR reinforced in RMC No. 9-2016 after finding NSSLAs treating the exemption too broadly. An NSSLA still registers, keeps books, and files returns like any other BIR-registered entity, reporting both its exempt and any taxable income streams. For how a comparably structured member-based entity handles a broader exemption scope, see Cooperatives: BIR Tax Exemption Under RA No. 9520.