Request for Exemption from the 20% Final Withholding Tax on the Interest Earned on Philippine Currency Bank Deposits With the Philippine National Bank

January 12, 1994 BIR RULING NO. 016-94 21 (c) (1) 000-00 016-94 Mr. Fernando L. Parreo 5296 Binakod Street Makati, Metro Manila S i r : This refers to your request for exemption from the 20% final withholding tax on the interest earned on your Philippine, currency bank deposits with the Philippine National Bank. It is represented that you are a retired pensioner of the Armed Forces of The Philippines; that your monthly retirement pension is P3,262.50; P975.00 as disability pension and P500.00 as old age pension; that these pensions are being sent to PNB, Makati and are deposited under your Savings Account; that said Bank withholds the 20% final tax on your interests on deposits under said Savings Account in your name; that you are of the belief that the tax withheld is illegal invoking the provision of Section 31 of PD 1638 dated September 10, 1979 which provides that the benefits received under said Decree are not subject to any tax whatsoever. In reply, please be informed that pursuant to Section 28(b) (7) (F) of the Tax Code, benefits received from the GSIS and the retirement gratuity received by government officials and employees are excluded from the gross income and, therefore, exempt from taxation. Accordingly, your monthly disability and old age pension benefits in the amounts as aforestated, are not subject to the withholding tax; thus, confirming the tax exempting provisions of the Presidential Decree you have mentioned. However, once your pensions are deposited in the Bank as your individual savings therein, the interest on your said deposits shall be subject to the 20% final withholding tax prescribed by Section 21(c) (1) in relation to Section 50(a) of the same Code. Such being the case, your request for tax exemption cannot therefore, be granted for lack of legal basis. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue