BIR Ruling No. 055-83

April 5, 1983 BIR RULING NO. 055-83 S i r : This refers to your letter dated February 2 and June 18, 1982 requesting that the interest earnings of a Special Guarantee Fund in the amount of P2,000,000.00 which is currently deposited with Land Bank of the Philippines under Time Deposit Account No. 8315, and which interest earnings are separately deposited under Savings Deposit Account No. 101-71-29-A be exempted from the withholding tax. In reply thereto, I have the honor to inform you 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 Ministry of Labor and the Rural Workers Office are liable to income tax, the interest on their banks deposits shall be subject to the 15% withholding tax in case of savings deposit and 20% withholding tax, in case of time deposits and yield from deposit substitutes in accordance with Section 24(cc) in relation to Section 53(d) both of the Tax Code, as amended by Presidential Decree No. 1739 and Batas Pambansa Blg. 135. However, inasmuch as the Ministry of Labor and the Rural Workers Office are government units, they are entitled to either a tax subsidy or payment constituting equity contributions in which case, they 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 pars. 4, 6 and 9, Finance Circular No. 2-78, implementing Section 23, Presidential Decree No. 1177) This serves as authority for the depository banks to forego withholding of the 15% tax on savings deposit and 20% tax in case of time deposit and yield from deposit substitutes maintained by the Ministry of Labor through the Rural Workers Office with them. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue