Request for Exemption from Withholding Tax on Interest Income of the Time and Saving Deposits of the Municipality of Urbiztondo, Pangasinan with the Development Bank of the Philippines (DBP)

January 29, 1991 BIR RULING NO. 011-91 24 (c) 000-00 011-91 S i r : This refers to your letter dated September 4, 1990 requesting exemption from the withholding tax on interest income of the time and saving deposits of the Municipality of Urbiztondo, Pangasinan with the Development Bank of the Philippines (DBP). In reply, please be informed that your request cannot be granted for lack of legal basis. Presidential Decree No. 1931 dated June 11, 1984 has withdrawn the tax and duty exemption privileges, including the preferential tax treatment of all units of government, i.e., the National Government, its agencies and political subdivisions, as well as the government-owned or controlled corporation. Corollary to this, Executive Order No. 93 effective March 10, 1987 withdrew all tax and duty incentives granted to government and private entities subject to certain exceptions. Tax exemption laws are strictly construed. One claiming the benefit thereof must bring himself substantially within the terms of the statute or justify his claim by the clearest grant of the organic or state law (House vs. Posadas, 53 Phil. 338; Asiatic Petroleum Co. vs. Llanes, 49, Phil. 466). Accordingly, in the absence of a clear grant of tax exemption, your municipality's interest income on bank deposits with DBP is subject to the 20% final withholding tax pursuant to Section 24 (c) in relation to Section 24 (e) of the Tax Code, as amended. (RMC No. 1-85 dated January 10, 1985) cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner