Exemption from the Payment of Final Withholding Tax — FSDC

April 9, 1981 BIR RULING NO. 072-81 024 (cc) 000-00 072-81 Farm Systems Development Corporation No. 17 Rudgen Building, Shaw Blvd. Pasig, Metro Manila Attention: Mr . Gregorio M . Locsin Deputy Administrator Gentlemen : In reply to your letter dated February 19, 1981, please be informed that pursuant to Revenue Regulations No. 12-80, implementing P.D. No. 1739, the final withholding tax prescribed therein shall not apply to interest income on bank deposits and yield on deposit substitutes derived by tax-exempt entities, as certified by the Commissioner of Internal Revenue. The Farm Systems Development Corporation (FSDC), a government-owned corporation is exempt from all taxes, duties, fees, imposts and other charges imposed by the government and its instrumentalities, pursuant to Section 14 of P.D. No. 681, dated April 4, 1975, as amended by P.D. No. 1595, dated June 4, 1978. The period of exemption shall be for ten (10) years from the date of effectivity of P.D. No. 681. Accordingly, the interest income on bank deposits of Farm Systems Development Corporation is exempt from the 15% final withholding tax in the case of savings deposit and 20% final withholding tax in the case of time deposits and yield on deposit substitutes prescribed by Section 24(cc) in relation to Section 53(3) both of the Tax Code, as amended by P.D. No. 1739. The FSDC is not covered by P.D. No. 1177, which requires government-owned or controlled corporation to pay income taxes effective July 30, 1977, since the tax-exemption originally granted under P.D. No. 681 had been incorporated in the amendatory decree (Section 10, P.D. No. 1595), which is a later law. This serves as authority of the depository banks to forego withholding of final tax on interest earnings of bank deposits maintained by Farm Systems Development Corporation with them. Very truly yours, RUBEN B. ANCHETA Acting Commissioner