Amount of Final Withholding Tax Deductible from Interests Payable

February 10, 1988 BIR RULING NO. 034-88 21 (c) (1) 24 (a) (1) 000-00 034-88 Gentlemen : This refers to your letter dated October 22, 1987 stating that in line with the provisions of Executive Order Nos. 228 and 229 subjecting to final withholding tax the interest on the new Land Bank 10-year bonds, your Office has been charged with the task of deducting from interests due to Land Bank bondholders such amounts corresponding to the final withholding tax; and that the new Land Bank 10-year bond bears market rates of interest that are aligned with 91-day treasury bills, payable twice a year. In connection therewith, you now request information on the following: er necessary information." In reply, I have the honor to inform you that under Section 20(y) of the Tax Code as implemented by subparagraph (b) of Section 2(h) of Revenue Regulations No. 17-84, the aforesaid LBP bonds bearing market rates of interest that are aligned with 91-day treasury bills rate are considered deposit substitutes. Accordingly, the yield or monetary benefit derived by Land Bank bondholders from your said LBP bonds are subject to the 20% withholding tax prescribed under Section 21(c)(1) and 24(e)(1) of the Tax Code, as amended. Moreover, the said final tax shall be withheld by you as payor-corporation and paid in the same manner and subject to the same conditions as provided in Section 51 of the National Internal Revenue Code, as amended. (Sec. 50(a), Tax Code). Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner