Interest Income on Bank Deposits of the Ministry of Social Services and Development Subject to Withholding Tax

January 25, 1984 BIR RULING NO. 013-84 53 (d)-55-83-013-84 Gentlemen : This refers to your letters dated August 1 and September 5, 1983 requesting that the interest income on bank deposits of the Ministry of Social Services and Development, Regional Office No. VII in the amount of P500,000.00 representing the donation of the First Lady from the Manila International Film Festival fund be exempt from the withholding tax. In reply, please be informed that Presidential Decree No. 1177 effective July 30, 1977 requires all government units, government-owned or controlled corporations to pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws. Accordingly, since the Ministry of Social Services and Development is liable to income tax, the interest income on its bank deposits shall be subject to the 15% withholding tax in the case of savings deposits and 20% in the case of time deposits and yield from deposits substitutes, in accordance with Section 24(cc) in relation to Section 53(d)(1) both of the Tax Code, as amended by Presidential Decree No. 1739 and Batas Pambansa Blg. 135. However, inasmuch as the Ministry of Social Services and Development is a government unit, it is entitled to either a tax subsidy or payments constituting equity contributions in which case, it shall not be required to pay cash or its equivalent. The revenue collecting agencies shall instead issue a "Payment Compliance Certificate" indicating the nature of the assessment and amount due. The subsidy shall be effected through journal vouchers or their equivalent (See Joint Budget Circular No. 289 and paragraph 4, 6 and 9, Finance Circular No. 2-78, implementing Section 23, Presidential Decree No. 1177). This serves as authority of the depository banks to forego withholding of the 15% tax on savings deposit and 20% tax in case of time deposits and yield from deposit substitutes maintained by Ministry of Social Services and Development with them. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner