Ms. Maria A.V. Reyes

January 26, 2010 BIR RULING [DA-(I-002) 013-10] RA 6426; PD 1246; 24 (B) (1) & 28 (A) (7) (b); RR 10-98; ITAD 052-01 Ms. Maria A.V. Reyes c/o Mr. Cosme Bascos, Unit 26A Marina Square Residential Suites Hyatt Hotel Building, 1588 M.H. Del Pilar Street Malate, Manila Madam : This refers to your letter dated January 14, 2010 stating that you are a non-resident individual from Brussels, Belgium, not engaged in trade or business in the Philippines, with Belgian Passport No. EG300956 issued at the Kingdom of Belgium Embassy in Manila on September 8, 2006, expiring on August 8, 2011; that you are not in the Bureau of Immigration's List of Registered Aliens nor in the Record Lists of Filipino Citizens; and that you intend to invest in Philippine banks on foreign currency deposits, hence, this request for tax exemption on said investments. In support of your request, you submitted the following documents: 1) Certification from the Bureau of Immigration dated January 1, 2009, stating, among others, that you are not in the Bureau of Immigration's List of Registered Aliens nor in the Record Lists of Filipino Citizens as of the date of issuance of said certification; and 2) Photocopy of your Belgian Passport. In reply, please be informed that Section 6 of Republic Act (R.A.) No. 6426, as amended by Presidential Decree (P.D.) No. 1246, provides as follows: " Section 6 . Tax exemption. All foreign currency deposits made under the said Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, including interest and all other income or earnings of such deposits, are exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-residents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines." (Italics provided) ECTAHc The above exemption of foreign currency deposits from taxes, particularly the interest income derived therefrom, is affirmed under Sections 24 (B) (1) and 28 (A) (7) (b) of the Tax Code of 1997, as amended, except those made by resident individuals, the pertinent portions of which provide viz. : "SEC. 24. Income Tax Rates. xxx xxx xxx (B) Rate of Tax on Certain Passive Income. . . . Provided, however, That interest income received by an individual taxpayer (except a non-resident individual) from a depository bank under the expanded foreign currency deposit system shall be subject to a final income tax at the rate of seven and one-half percent (7 1/2%) of such interest income: . . . .'' "SEC. 28. Rates of Income Tax on Foreign Corporations. xxx xxx xxx Any income of nonresidents, whether individuals or corporations, from transactions with depository banks under the expanded system shall be exempt from income tax." (Italics provided) Accordingly, interest income received by a non-resident individual from a depository bank under the expanded foreign currency deposits system is not subject to the final withholding tax of 7.5% imposed under Revenue Regulations (Rev. Regs.) No. 2-98, as amended, implementing Section 57 (A) of the Tax Code of 1997, as amended, in relation to Section 24 (B) (1) and the last paragraph of Section 28 (A) (7) (b) thereof. Furthermore, Section 2.24 of Revenue Regulations No. 10-98, provides, viz. : "SECTION 2.24. Income Tax Rate of Interest Income from Foreign Currency Deposit. xxx xxx xxx (B) Compliance and Administrative Procedures for Non-Resident Citizen and Non-Resident Alien. The tax on interest income from foreign currency deposit shall be imposed unless the depositor who is a non-resident citizen alien can present documentary evidence that he is not a resident of the Philippines. Such evidence shall consist of the original or certified copy of any of the following: xxx xxx xxx (4) a certification from the Bureau of Immigration of the Philippines that a non-resident alien is not a resident of the Philippine; or DAcSIC xxx xxx xxx." Since you are a non-resident alien individual and has complied with the requirement of Revenue Regulations No. 10-98, the interest income which you may derive from your foreign currency deposits here in the Philippines shall be exempt from the final withholding tax of 7 1/2%. 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.) GREGORIO V. CABANTAC Deputy Commissioner