Interest Earned by an Association on Account of Its Bank Deposit Subject to Income Tax

May 11, 1978 BIR RULING NO. 002-78 15% Withholding Tax This refers to your letter dated November 28, 1977 requesting information on whether the interest income derived by the association from its bank deposit is subject to the 15% withholding tax imposed by Presidential Decree No. 1156. cd In reply, I have the honor to quote hereunder Section 27(e) of the Tax Code: "SEC. 27. Exemptions from tax on Corporations . The following organizations shall not be taxed under this Title in respect to income received by them as such "xxx xxx xxx "(e) Corporation or association organized and operated exclusively for religious charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of the net income of which inures to the benefit of any private stockholder or individual. "However, the income of any of the foregoing organizations of whatever kind and character from any of their properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income shall be liable to the tax imposed under this Title." (Emphasis ours) Pursuant to the above-quoted provision, income derived by an association organized for religious purpose is exempt from income tax. However, the income of whatever kind and character derived from its properties, real or personal, regardless of the disposition made of such income, is subject to income tax. Thus, it has been held that interest income earned by a religious corporation on it's bank deposit is subject to income tax, regardless of the disposition made of such income. (The Lutheran Church-Missouri Synod, The Lutheran Philippine Mission, subsidiary), vs. Commissioner of Internal Revenue, CTA Case No. 2000, November 17, 1972). In view thereof, the interest earned by the association on account of its bank deposit is subject to income tax and consequently, said interest income is subject to the 15% withholding tax imposed by P.D. No. 1156. aisa dc