Request for Exemption from Final Withholding Tax and/or Payment Compliance Certificate of Interest on UP's Deposits with PNB

February 21, 1984 BIR RULING NO. 040-84 24-cc-56-83-040-84 Gentlemen : This refers to your letters dated July 12 and August 18, 1983 requesting exemption from the final withholding tax and/or Payment Compliance Certificate of the interest on the savings/time deposits maintained by the University of the Philippines with Philippine National Bank. In reply, please be informed that Presidential Decree No. 1177, effective July 30, 1977, 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. 133, S. 1977, Secretary of Justice) Accordingly, since the University of the Philippines is liable to income tax, the interest on its bank deposits shall be subject to the withholding tax rate of 15% in case of savings deposit and 20% in case of time deposits and yield from deposit substitutes in accordance with Section 24(cc) in relation to Section 53(d)(1) both of the Tax Code, as amended. However, inasmuch as the University of the Philippines is a government agency, it is entitled to either a tax subsidy or payments constituting equity contributions, 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 Joint Budget Circular No. 289 and paragraphs 4, 6 and 9, Finance Circular No. 2-78, implementing Section 23, Presidential Decree No. 1177). This serves as authority of the depository banks to forego withholding of the 15% tax on savings deposit and 20% tax in case of time deposits and yield from deposit substitutes maintained by the University of the Philippines with them. atdc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner