BIR Ruling [DA-310-99]

May 20, 1999 BIR RULING [DA-310-99] Embassy of Finland Makati City Metro Manila Attention: Mr. Christian Lindholm Second Secretary S i r : This refers to your letter dated 20 April 1999 requesting for a ruling that your interest income on bank deposits with the Development Bank of the Philippines under Account Number 547-013511 be exempted from Philippine withholding tax. In reply, please be informed that pursuant to Section 32(B)(7)(a) of the Tax Code of 1997, foreign governments shall be exempt from Philippine income tax on their interest income derived from their deposits in banks in the Philippines. Such being the case, your interest income from your Embassy's deposits with the Development Bank of the Philippines is exempt from the 20% final withholding tax. With respect to the bank deposits of diplomatic personnel, the exemption from withholding tax on interest is covered under Article 34 of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961, which provides that diplomatic envoys are exempt from all dues and taxes, whether personal or real, national, regional or municipal, except the following: xxx xxx xxx "(d) dues and taxes on private income, having its sources in the receiving state and capital taxes on investments in commercial ventures in the receiving state ." Since it is represented that the deposit account being held by you with the Development Bank of the Philippines does not arise from the above-stated exception, the interest income accruing to such deposit is not subject to income tax, and consequently, not subject to the final withholding tax of 20% imposed by Section 24(B)(1) of the Tax Code of 1997. (BIR Ruling No. 062-85) TSADaI This ruling is being issued on the basis of the facts as represented. However, if it shall be discovered that the facts are different, then this ruling shall be rendered null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group