BIR Ruling

August 9, 1977 Palayan Ng Bayan FTI Building Taguig, Rizal Attention: Atty . Nicolas S . Fernandez Deputy Executive Director Gentlemen : This refers to your letter dated July 19, 1977 requesting that a certificate be issued to the effect that the interests on the deposits of Palayan Ng Bayan with the Philippine National Bank is exempt from the 15% withholding tax on the interests on bank deposits. It appears that Palayan Ng Bayan is a 100% government entity created by Presidential Decree No. 262 dated August 2, 1973; that it is a project of the office of the President, of the First Lady and Metro Manila Governor, Mrs. Imelda Romualdez Marcos and of provincial Governors, aimed at attaining self-sufficiency in rice and other agricultural food commodities; that the funds to be used in this project are the proceeds from the sale of P200-million worth of Cereal Bonds issued by the National Government through the Secretary of Finance for purchase by government and other financing institutions; and that the said proceeds are deposited with the Philippine National Bank for the account of the President. In reply, I have the honor to inform you that inasmuch as Palayan Ng Bayan is a project of a government instrumentality and is funded entirely by money of the government, it is exempt from income tax. Accordingly, since under Sec. 3 of Revenue Regulations No. 8-77 which implements Presidential Decree No. 1156, the withholding tax therein imposed shall not cover interests paid on deposits maintained by tax exempt entities as certified by this Office, the 15% withholding tax on interests shall therefore not apply to deposits maintained by the Palayan Ng Bayan project with the Philippine National Bank. This serves as authority of the depository banks to forego withholding of the 15% tax on interest earnings of the funds deposited with them by Palayan Ng Bayan. Very truly yours, CONRADO P. DIAZ Deputy Commissioner of Internal Revenue TAN-D2567-D1025-A-2