BIR Ruling [DA-220-02]

November 25, 2002 BIR RULING [DA-220-02] 27 (D) (1); 562-98 Order of Discalced Carmelite Fathers, Inc. (OCD) San Isidro, Jaro, Iloilo City Attention: Rev . Fr . Thomas Shanahan, OCD Superior Gentlemen : This refers to your letter dated July 25, 2000 requesting for exemption from withholding tax on interest income from your bank deposits as indorsed by the Regional Director of Revenue Region No. 11, Iloilo City, dated January 10, 2001. Documentary evidence submitted to this Office disclosed that the Carmelite Fathers Inc. is a religious society duly recognized in accordance with the Canon Law and Rules and Regulation of the Roman Catholic Apostolic Church; that the said corporation has a market savings deposit with Allied Banking Corporation which earns interest with a total of P82,164.13 as of October 31, 2000; and that the said religious organization is applying for tax exemption from payment of withholding tax on their interest income from bank deposits for the reason that the said income will be utilized in the construction of the Community Center of Saint Joseph the Worker Parish as resolved in their Board Meeting dated September 2, 2000. In reply, please be informed that pursuant to the last paragraph of Section 30 of the Tax Code of 1997, income of whatever kind and character of all the organizations enumerated therein derived from any of their properties, real or personal or from any of their activities conducted for profit regardless of the disposition made of such income shall be subject to tax imposed under this Code. Consequently, although you may be exempted from income tax on income received by you as such organization, pursuant to Section 30 of the Tax Code of 1997, the interest income of your bank deposits, being income derived from personal property, are subject to income tax. Accordingly, interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments are subject to the 20% final withholding tax pursuant to Section 27(D)(1) in relation to Section 57(A) of the Tax Code of 1997. Moreover, your interest income derived under the expanded foreign currency deposit system are subject to a final withholding tax of 7 1/2% pursuant to Section 27(D)(1) in relation to Section 57(A) of the Tax Code of 1997. (BIR Ruling No. DA-562-98 dated December 9, 1998) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service