BIR Ruling

January 4, 1974 Messrs. Quasha, Asperilla, Zafra, Tayag & Ancheta L a w y e r s Don Pablo Bldg., 3177 Amorsolo St. Makati, Rizal Attention: Atty . Alonzo C . Ancheta Gentlemen : This refers to your letter dated December 5, 1973 requesting clarification as to the income tax liability of a non-resident foreign trust company on interest it earns in the Philippines from a 90-day "foreign currency deposit" of U.S. $5 million made with a Philippine bank. You alleged that there is some inconsistency between Section 6, Republic Act No. 6426 and the ruling of this Office dated August 16, 1973 which hold that interest derived from money placements with a Philippine bank by a foreign corporation for short periods of time, any 90 days is subject to the 35% withholding tax. In reply, I have the honor to inform you that our ruling is predicated on your query as to whether money placements made with a local bank by a foreign corporation for short periods of time, as specified therein, are considered "foreign loans" within the contemplation of Presidential Decree No. 131, which we answered in the negative, and, therefore, the tax on the interest thereon is 35%; otherwise, it should be 15% as provided in said Decree. As to whether money placements made with a local bank by a non-resident foreign trust company for short period of time, any 90-day deposit of U.S. $5 million is considered "foreign currency deposit" within the contemplation of Republic Act No. 6426, it is suggested that the question be addressed to the Central Bank of the Philippines, which is the authority to decide on such matters. In the event that such short-time deposit adverted to qualifies as "foreign currency deposit", then the interest thereon is not subject to income tax under Section 6, Republic Act No. 6426. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."