Whether Nasutra's Earnings from Its Trust Placements with Republic Planters Bank Are Subject to 15% FWT

February 18, 1986 BIR RULING NO. 014-86 21 (d) 000-00 014-86 Gentlemen : This refers to your letter dated November 5, 1985 requesting a ruling as to whether Nasutra's earnings from its trust placements with the Republic Planters Bank (RPB) are subject to the 15% (now 17 1/2) final withholding tax. It appears that Nasutra placed P521.467 million "sinking fund" with the Trust Department of the RPB, that the said fund was intended to liquidate and pay Nasutra's maturing obligation (swap loan) with RPB-FCDU; that Nasutra has not parted with the control and disposition over the said fund which is earmarked for the payment of the firm's US $50.0 million swap loan with RPB-FCDU, that Nasutra did not receive any income at the maturity of the investment since the income was used to pay the swap loan with RPB-FCDU, that Nasutra made partial withdrawal from the said fund in the amount of P169.844 million with the concurrence of RPB which Nasutra later on restored; and that the amount of P18.279 million which is equivalent to the 15% withholding tax on Nasutra's trust earnings was transferred to RPB-FCDU as additional payment of Nasutra's swap loan instead of remitting the same to the Bureau of Internal Revenue as required by law. cdtech In reply thereto, please be informed that under Section 24(cc) of the Tax Code as amended by P.D. No. 1959 which took effect on October 15, 1984, a final withholding tax of 15% shall be imposed on interest income from Philippine currency bank deposits whether savings or time deposits, and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements received by domestic or resident foreign corporation. From the foregoing facts, the (trust) sinking fund belongs to Nasutra; that the earnings of said trust placements were considered received by Nasutra; hence, said earnings paid or accrued are subject to the 15% final withholding tax; and beginning January 1, 1986, to 17 % final withholding tax, pursuant to Section 24(d) [formerly Section 24(cc)] of the Tax Code, as further amended by P.D. No. 1994. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner