Parties Liable for the Payment of the 1% Foreign Exchange Transaction Tax

March 4, 1985 BIR RULING NO. 032-85 260-A 000-00 032-85 S i r : This refers to your letter dated December 18, 1984 to Mr. Basilio Estanislao, President, Bankers Association of the Philippines, which was referred to this Office for appropriate action, requesting clarification as to the parties liable for the payment of the 1% foreign exchange transaction tax. cdt In reply, I have the honor to inform you that under Section 260-A of the Tax Code, as amended by P.D. No. 1959 pertinent portion of which is quoted hereunder as follows: "Sec. 260-A. Additional Tax on banks, non-bank financial intermediaries and authorized foreign-exchange dealer . There shall be collected, in addition to the tax on gross receipts imposed under Section 260 hereof, a tax of one per centum (1%) based on the gross value of every sale or purchase of foreign exchange by all banks, non-bank financial intermediaries, and all authorized foreign-exchange dealers. xxx xxx xxx the parties liable for the payment of the 1% foreign exchange transaction tax are the banks, non-bank financial intermediaries and other authorized foreign exchange dealers." (Sec. 1, Revenue Regulations No. 16-84; Revenue Memorandum Circular No. 30-84) The interpretation given by the banks, that the 1% foreign exchange tax is a tax on sellers and buyers of foreign exchange and that they are just withholding agents is not correct. The aforecited provisions of the law and implementing regulations do not warrant such an interpretation. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner