Depositor-Beneficiary Not Entitled to Tax Exemption Privileges with Respect to Interest Income

November 10, 1977 BIR RULING NO. 007-77 Whether a depositor-beneficiary is entitled to tax exemption privileges This refers to your letter dated August 3, 1977 requesting that the interest income of the monetary benefits received by that Bank in behalf of the beneficiaries of the U.S. Veterans Administration be exempted from the 15% withholding tax on bank deposits imposed by Section 53(c) of the Tax Code, as amended by Presidential Decree No. 1156. In support of your request, you cited Republic Act No. 360 which provides that payments of benefits "made to, or on account of, a beneficiary under any of the laws of the United States administered by the United States Veterans Administration relating to veterans residing in the Philippines shall be exempt from taxation . . ." In reply, I have the honor to inform you that although under the above-quoted provision of law, the benefits received by that Bank, in behalf of the beneficiaries, are exempt from income tax, however, such exemption does not extend to the interest income earned by the beneficiaries, who are considered the depositors while said benefits are under savings or time deposits, because the depositor-beneficiaries do not enjoy tax exemption privileges in respect of such income. Accordingly, said interest income is subject to income tax. In view thereof, your request for exemption cannot be granted for lack of legal basis. cd