BIR Ruling

March 28, 1972 Mr. A. V. Antiporda Director Foreign Exchange Department Central Bank of the Philippines Manila S i r : This refers to the letter dated March 5, 1970 of Dresdner Bank, 6 Frankfut A.M. 1, which you referred to this Office for resolution of the following questions: "If a loan is granted at a discount, the lender has besides the interest an additional profit corresponding to the extent of the discount. We would like to know, whether such discount is subject to a withholding tax in your country in the case, that the creditor is a non-resident individual or a foreign company. "We are also interested in the corresponding question concerning debentures, issued at a discount by the Government, a district, municipality or by a company of your country. Please inform us also about the withholding tax situation concerning the commitment fee." In reply, I have the honor to inform you that under the foregoing facts, the discount as well as the commitment fee are subject to withholding tax, in accordance with Section 53 of the National Internal Revenue Code. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue