Bank of the Philippine Islands

September 18, 2007 BIR RULING [DA-496-07] DA 087-07 Bank of the Philippine Islands BPI Building, Ayala Avenue corner Paseo de Roxas Makati City Attention: Atty. Rodolfo B. Fernandez Vice President Gentlemen : This refers to your letter dated October 10, 2006 requesting on behalf of the following non-stock, non-profit educational institutions, to wit: 1. St. Mary's College of Quezon City 2. St. Joseph's Academy of Las Pias, Inc. 3. Central Philippine University, Inc., Jaro, Iloilo City 4. Colegio de San Juan de Letran 5. Ateneo de Davao University and Davao Medical School Foundation 6. University of the Philippines 7. College of the Holy Spirit of Manila for a ruling that interest income derived by the above-named institutions on their local bank deposits used, exclusively, directly and exclusively in pursuance of their purpose as educational institutions is exempt from the 20% final withholding tax and the 7.5% tax on interest income under the expanded foreign currency deposit system. cASEDC In reply thereto, please be informed that under Department Order No. 149-95 dated November 24, 1995, amending Department Order No. 137-87, interest income from currency bank deposits and yield from deposit substitute instruments used actually, directly and exclusively in pursuance of the educational purpose of the institution is exempt from the 20% final tax and 7.5% tax on interest income under the expanded foreign currency deposit system imposed under Section 27 (D) (1) of the Tax Code of 1997 subject to compliance with the conditions that as tax exempt educational institutions they shall on an annual basis submit to the Revenue District Office concerned an annual information return and duly audited financial statement together with the following: a) Certification from its depository bank as to the amount of interest income earned from passive investment not subject to the 20% final withholding tax and 7.5% tax on interest income under the expanded foreign currency deposit system imposed by Section 27 (D) (1) of the Tax Code of 1997; b) Certification of actual utilization of the said income; and c) Board Resolution by the school administration on proposed projects (i.e., construction and/or improvement of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of the money deposited in banks or placed in money markets, on or before the 15th day of the fourth month following the end of its taxable year (Sec. 4, Finance Department Order No. 137-87; ENPS-012-98 dated November 25, 1998; and BIR Ruling No. 46-00 dated September 26, 2000) In view of the foregoing, interest income from currency bank deposits and yield from deposit substitute instruments and under the expanded foreign currency deposit system derived by the above-mentioned non-stock, non-profit educational institutions in pursuance of their purpose as educational institutions are respectively exempt from the payment of the 20% and 7.5% final tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service