BIR Ruling [DA-218-97]

June 5, 1997 BIR RULING [DA-218-97] Fernandez, Santos & Lopez 7th Floor, RicoGen Building 112 Aguirre Street, Legaspi Village 1229 City of Makati Attention: Mr . Eliseo A . Fernandez Senior Managing Partner Gentlemen : This refers to your letter dated March 19, 1997 requesting in behalf of European Bank for Reconstruction and Development (EBRD), for exemption from tax on interest payments it will be receiving from its proposed investments in Philippine government bonds. cdtech It is represented that EBRD with principal office in London, is a multilateral financial institution established by member countries and international organizations for the purpose of fostering the transition towards open market-oriented economies and to promote private entrepreneurial initiative in the Central and European countries committed to an applying the principles of multiparty democracy, pluralism and market economies; that EBRD as an international financing institution has been granted immunities, privileges and exemptions among which is exemption from all direct taxes as provided under Article 53 of the Agreement dated May 29, 1990; and that as part of its investment activity, EBRD wants to invest its funds in Philippine investments including Philippine government bonds. In reply, please be informed that income received from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by international or regional financing institutions established by governments is exempt from income tax pursuant to Section 28(b)(8)(A)(iii) of the Tax Code, as amended. (BIR Ruling No. 102-85 dated June 25, 1985) Such being the case, interest income payments to EBRD in respect of its investments shall not be subjected to withholding tax. casia Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue