BIR Ruling [DA-534-99]

September 16, 1999 BIR RULING [DA-534-99] Mr. Virgilio J. Calaguas 1 M. Marcos Street San Juan Metro Manila S i r : This refers to your letter dated August 3, 1999 requesting on behalf of your client, Jose Rizal College for exemption from the 20% final tax imposed on interest on bank deposits, such as savings and time deposits and/or yield on deposit substitute instruments. cdlex In reply, please be informed that under Department Order No. 149-95 dated November 24, 1995 amending Finance Department Order No. 137-87, interest income from Philippine currency bank deposits and yield from deposit substitute instruments used actually, directly and exclusively in pursuance of the school's purposes as an educational institution, are exempt from 20% final tax imposed by Section 24(c)(1) of the Tax Code, as amended [now Section 27(D)(1) of the Tax Code of 1997] subject to compliance with the conditions that as a tax-exempt educational institution it shall on an annual basis submit to the Revenue District Office concerned an annual information return and duly audited financial statements, together with the following: a) Certification from its depository banks as to the amount of interest income earned from passive investments not subject to the 20% final tax imposed by Section 24(e)(1) of the Tax Code, as amended [now 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 money deposited in banks or placed in money markets, on or before the 15 th day of the fourth month following the end of its taxable year. (Sec. 4, Finance Department Order No. 137-87) Accordingly, interest income from currency bank deposits and yield from deposit substitute instruments derived by Jose Rizal College in pursuance of its purpose as an educational institution is exempted from the payment of the 20% final tax. (BIR Ruling No. S-26-103-96 dated October 3, 1996) 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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)