Exemption of Interest Income of PCED from Withholding Tax under P.D.1739 Revoked by P.D.1177

February 19, 1982 BIR RULING NO. 037-82 053-e 274-81 037-82 Philippine Center for Economic Development University of the Philippines Campus Diliman, Quezon City 3004 Attention: Mr . Jose Encarnacion, Jr . Executive Director Gentlemen : This refers to your letter dated September 28, 1981 requesting exemption of the interest income of the Philippine Center for Economic Development (PCED) from the withholding tax provision of Section 53(e) in relation to Section 24(cc) both of the Tax Code, as amended by Presidential Decree No. 1739. In reply, please be informed that although under Section 10 of Presidential Decree No. 453, PCED is exempt from taxes, the said tax exemption privilege is deemed to have been revoked by Presidential Decree No. 1177, effective July 20, 1977, which requires all government units, government-owned or controlled corporations to pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws. (See Opinion No. 183, S. 1977, Secretary of Justice). Accordingly, since PCED is liable to income tax, the interests of its bank deposits shall be subject to the 15% withholding tax in case of savings deposit and 20% in the case of time deposits and yield from deposit substitutes, in accordance with Section 24(cc) in relation to Section 53(e) both of the Tax Code, as amended by Presidential Decree No. 1739. However, inasmuch as PCED is a tax exempt government unit, it is entitled to a tax subsidy, in which case, it shall not be required to pay cash or its equivalent. The revenue collecting agencies shall instead issue a "payment compliance certificate" indicating the nature of the assessment and amount due. The subsidy shall be effected through journal vouchers or their equivalent (See Paragraph 4, 6 and 9, Finance Circular No. 2-78, implementing Section 23, Presidential Decree No. 1177). Very truly yours, RUBEN B. ANCHETA Acting Commissioner