BIR Ruling No. 056-83

April 5, 1983 BIR RULING NO. 056-83 Gentlemen : This refers to your letter dated October 4, 1982 requesting a ruling as to whether the interest income of bank deposits maintained by the Welfare Fund Overseas Workers (WELFUND) in your bank are exempt from withholding tax under Section 24(cc) of the Tax Code, as amended by Presidential Decree No. 1739. cdta It appears that the WELFUND in the Ministry of Labor was created pursuant to Presidential Decree No. 1694, as amended by Presidential Decree No. 1809 to be funded with contributions from overseas employers of Filipino workers, for the purpose of providing social and welfare services to Filipino overseas workers, including insurance coverage, legal assistance, placement assistance and remittance services; that it is recorded as a Special Account in the General Fund and transactions in it are subject to such rules and regulations as may be formulated by the Minister of Finance, who acts in consultation with the Minister of Labor and the Minister of Budget; and that the WELFUND shall be administered by a Board of Trustees through a Secretariat attached to the Office of the Minister of Labor and Employment. In reply, I have the honor to inform you that Presidential Decree No. 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. Under the foregoing facts, a trust has been created and income of such trust is subject to income tax. Accordingly, since the Ministry of Labor as trustee in this case, is liable to income tax, the interests on the bank deposits of WELFUND shall be subject to the 15% withholding tax in case of savings deposit and 20% in the case of time deposit 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. cdti However, inasmuch as the Ministry of Labor 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 WELFUND with them. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue