BIR Ruling [DA-045-01]

March 22, 2001 BIR RULING [DA-045-01] 24 (B) (1); 27 (D) (1); DA-562-98 Allied Banking Corporation 149 Congressional Avenue Project 8, Quezon City Attention: Mr . Michael Angelo O . Lagazon Branch Head Gentlemen : This refers to your letter dated January 12, 2000 requesting a ruling as to whether or not your client is exempt from the 20% final withholding tax on its bank deposits and yields from deposit substitutes. It is represented that Manila Bay Foundation, Inc. is a non-stock, nonprofit corporation with postal address at No. 3 Congressional Avenue, Quezon City; that it is organized for charitable purposes; that its sources of income comes from the collection received from members and contributions to the foundation; that it was issued a letter by this Office approving its request for tax exemption pursuant to Section 26(e) of the Tax Code as amended (now Section 30(E)of the Tax Code of 1997); that per its experience with other banks, its tax exemption include the final tax on interest income on the foundation's placements and other savings account; and that the Legal Division of Allied Banking Corporation advised your office that Manila Bay Foundation, Inc.'s tax exemption does not cover the 20% withholding tax on interest income from placements or any savings account maintained by your client in the bank. In reply, please be informed that although your client is exempt from the payment of income tax on income received by it as such foundation and from filing the corresponding income tax return concerning such income, it is nevertheless subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Accordingly, interest income of your client from Philippine currency bank deposits and yield or any other monetary benefits from deposit substitute instruments are subject to the 20% final withholding tax pursuant to Section 27(D) in relation to Section 57(A) of the Tax Code of 1997. (BIR Ruling No. DA-562-98 dated December 9, 1998) In view of the foregoing, this Office confirms your opinion that your client Manila Bay Foundation, Inc. is subject to the payment of the 20% withholding tax on bank deposits. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service