35% Transaction Tax — Commercial Paper

February 4, 1980 BIR RULING NO. 006-80 Santiago, Sison & Associates 106 Paseo de Roxas Makati, Metro Manila Attention: Ms . Emilie S . Layaoen Gentlemen : This refers to your letter dated December 10, 1979 requesting in behalf of your client, First Philippine Capital Corporation, which is acting as the exclusive financial agent of the Philippine Charity Sweepstakes Office (PCSO) confirmation of your opinion that the PCSO Long-Term Commercial Papers to be issued in the form of promissory notes in the principal amount of P200 million for the purpose of financing the construction of the Lung Center of the Philippines is subject to the 35% transaction tax imposed by Section 210(b) of the Tax Code of 1977, as amended, as implemented by Revenue Regulations No. 7-77. aisa dc You have represented that the contemplated PCSO Long-Term Commercial Papers are in negotiable form and are in denomination of P200,000.00 to enable free negotiation thereof to money market investors; that they are not bonds nor capital market debt instruments but are instead money market instruments; and that they will be issued in the primary market to financial intermediaries. In reply, I have the honor to inform you that Section 210(b) of the Tax Code, as amended, defines commercial paper which is subject to the 35% tax imposed therein as follows: "(1) 'Commercial paper' shall be defined as an instrument evidencing indebtedness of any person or entity, including banks and non-banks performing quasi-banking functions, which is issued, endorsed, sold, transferred or in any manner conveyed to another person or entity, either with or without recourse and irrespective of maturity. Principally, commercial papers are promissory notes and/or similar instruments issued in the primary market and shall not include repurchase agreements, certificates of assignments, certificates of participations, and such other debt instruments issued in the secondary market." The Long-Term Commercial Papers in question to be floated by the PCSO in the form of promissory notes which shall be issued in the primary market to financial intermediaries, fall within the purview of the above definition; hence said commercial papers are subject to the 35% transaction tax prescribed by Section 210(b) of the Tax Code of 1977, as amended. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue