BIR Ruling [DA-541-99]

September 21, 1999 BIR RULING [DA-541-99] Home Development Mutual Fund The Atrium of Makati Makati Avenue Makati City Attention: Ms . Zorayda Amelia C . Alonzo President and Chief Executive Officer Gentlemen : This refers to your letter dated November 16, 1998 stating that the Pag-IBIG Fund, being the sole active lending window for the Government's Shelter Program, is planning to float in the local market bonds to finance its home lending activities; and that the proposed bonds will have a term of five (5) years. Based on the foregoing, you now request for a ruling as to whether or not the income to be derived by the investors from the said bonds is exempted from the final withholding tax. LexLib In reply, please be informed that the term "bond" is a very broad term. Fundamentally, it is an obligation; a written promise to pay money. It is thus similar to, and may be said to be, a form of promissory note. (par. 25, 11 Am Jur 2d) (BIR Ruling No. 052-98 dated May 2, 1998) And as such, income to be derived by the investors from the said bonds is subject to the 20% final withholding tax pursuant to Sections 24(B)(1) and 27(D)(1), both of the Tax Code of 1997. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)