BIR Ruling

June 26, 1973 The Honorable The Secretary of Foreign Affairs Thru the Honorable The Secretary of Finance Manila S i r : This refers to the letter of the Philippine Embassy in Barne, Switzerland, requesting information as to the taxation of the interests of bank deposits of diplomatic missions in the Philippines, particularly that of the Swiss Embassy in Manila. Interests on the bank deposits of foreign embassies in the Philippines such as the Swiss Embassy are exempt from income tax. (Sec. 29(b)(7)(A), National Internal Revenue Code) Exemption may also be based on the principle of exterritoriality or right of extraterritoriality, pursuant to which certain persons and property belonging to one State and found in the territory of another are considered outside the jurisdiction of the latter and therefore, not subject to taxation. However, the interest income of the personnel bank deposits of the personnel of the embassies is subject to income tax. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5