Whether Certain Earnings Are Includible in Determining a Bank's Taxable Income

April 4, 1986 BIR RULING NO. 033-86 29 000-00 033-86 Gentlemen : This refers to your letter dated August 1, 1985 requesting confirmation of your opinion to the effect that earnings net of final 15% withholding tax as well as earnings from tax-exempt investments are not includible in determining the taxable income of your Bank. It is represented that earnings subjected to the 15% final tax consist of earnings from Philnabank bills, treasury bills, CB bills and Interbank Lending (Term), and that earnings from tax-exempt investments consist of earnings from LBP and DBP countryside bills. In reply, I have the honor to inform you that your opinion is hereby confirmed. Items of gross income subjected to the final income tax shall not be included in the determination of the gross income of the recipient corporations. (Section 29(b) of the Tax Code) Moreover, gross income "does not include those items of income exempted by statute or by fundamental law. Such tax-free income should not be included in the income tax return unless information regarding it is specifically called for." (Sec. 61, Revenue Regulations No. 2) Therefore, since LBP and DBP countryside bills are tax exempt both as to principal and interest, the interests derived from said investment are not subject to the corporate income tax, as well as the bank tax prescribed by Section 220 (formerly Section 260) of the Tax Code, as amended by P.D. No. 1994. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner