BIR Ruling

March 11, 1976 Bankers Association of the Philippines Philippine Banking Corporation Building Bonifacio Drive, Manila Gentlemen : I have the honor to inform you that this Office has ruled that, for purposes of computing the 5% bank tax, interests from government bonds or securities, which by specific provision of law, are "exempt from taxation" or "exempt from all taxes" do not form part of the gross receipts on which said tax is imposed, for to include such tax free interest income as part of the basis of the bank tax would, in effect, nullify the tax exemption specifically provided for in the law. It should be noted, however, that Central Bank Certificates of Indebtedness (CBCI) are not among those government bonds and securities enjoying exemption from taxation; for although the purchasers thereof are not made to pay income tax on interests earned by them from said certificates, said interests are not actually tax-free, as the Central Bank assumes payment of the income tax due thereon. Such being the case, interests earned by banks from Central Bank Certificates of Indebtedness form part of their gross receipts on which the 5% bank tax shall be computed. cdt Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3