BIR Ruling No. 004-80

July 30, 1980 BIR RULING NO. 004-80 210 113-80 04-80 Allied Leasing and Finance Corporation Allied Bank Building Ayala Ave. cor. Legaspi Street Makati, Metro Manila Attention : Mr . Domingo Chua President Gentlemen: This refers to your letter dated July 24, 1980 requesting that your issuance of Collateral Trust Bonds, be exempt from the 35% transaction imposed by Section 210(b) of the Tax Code of 1977, as amended. It is represented that Corporation will issue to the public Fifty Million (P50,000,000.00) Peso worth of Collateral Trust Funds which is to be governed by a trust indenture between the Issuer and its Trustee which shall be the Trust Department of a local commercial bank; that the bonds will be in denominations of P10,000.00, P50,000.00 and P100,000.00 to mature after five (5) years from the date of issue; that the bonds will bear interest at the rate of 18% per annum payable at the end of each year; and that the bonds may be redeemed at the option of the Issuer, upon notice, after 3rd year from issue or at the option of the holder, after 2nd year from issue. In reply, I have the honor to inform you that under the foregoing facts, the Collateral Trust Bonds of that Corporation are not being issued as money market instruments; hence, said bonds do not come within the purview of the term "commercial papers" intended to be subject to the 35% transaction tax prescribed by Section 210(b) of the National Internal Revenue Code, as amended.Accordingly, that Corporation is not subject to the 35% transaction tax on its issue of the aforesaid bonds. However, those buying the said bonds should be made aware of the fact that the transaction tax is not being imposed on the issuer of such bonds by printing or stamping thereon in bold letters the following statement: "ISSUER NOT SUBJECT TO TRANSACTION TAX UNDER SECTION 210(b), TAX CODE OF 1977, AMENDED." Bondholders/purchasers of said bonds are however, subject to income tax on interest and/or gains derived from their investments or transactions in said bonds, and therefore, income payments by that Corporation to the holders thereof shall be subject to the expanded withholding tax of 15% pursuant to Section 1(h) of Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79. In complying with the withholding requirements of the abovementioned Regulations, that Corporation is required to furnish each individual payee a written statement (BIR Form 1743) showing the income payment made by it and the amount of taxes deducted and withheld therefrom, pursuant to Section 6 of Revenue Regulations No. 13-78, as amended. Very truly yours, TOMAS C. TOLEDO Acting Commissioner