BIR Ruling No. 073-82

March 11, 1982 BIR RULING NO. 073-82 53-a 000-00 073-82 Anscor Capital & Investment Corporation 5th Floor Builders Centrs. 170 Salcedo Street, Legaspi Village Makati, Metro Manila Attention: Atty . Liwayway V . Chato AVP-Legal Counsel Gentlemen : This refers to your letter February 16, 1982 requesting confirmation of your opinion that yield/income or any other monetary benefit derived by your investors-clients from investment management agreements (IMA) under a portfolio or fund management arrangement with your Company (a non-bank quasi-bank) is subject to a final withholding tax of 20% by virtue of Batas Pambansa Blg. 135, amending Sections 21 (d) and 53 (d) (l) of the Tax Code (formerly Sections 21(b) and 53 (e) (l), respectively). In your letter of March 2, 1982, you also requested confirmation of your opinion that said 20% final withholding tax applies to both individual and corporate taxpayers from the yield or any other monetary benefit derived from trust funds or similar arrangements. In reply, I have the honor to inform you that your opinions are hereby confirmed. Section 1(h) of Revenue Regulations No. 13-78, as further amended by Revenue Regulations No. 16-81 dated July 24, 1981 provides as follows: cdta "(h) Other trust arrangements . On yield/income, not previously subjected a final tax, pertaining to all other trust and similar arrangements, whether covered by a trust indenture/agreement or by an investment/portfolio management agreement or any other similar document involving the investment/Management of funds Provided, That any such arrangement (i) does not fall within the purview of the preceding subsection (g) hereof, and (ii) is not characterized as a trust certificate under the definition of deposit substitutes, pursuant to Section 2(g) of Revenue Regulations No. 12-80, as amended by Revenue Regulations No. 8-81 twenty per centum (20%)." Under the above-quoted provision of Revenue Regulations No. 13-78, as amended, which implement Section 53(f) of the Tax Code, as amended by PD No. 1351, yield from trust funds and similar arrangement are subject to the 20%, amended Section 53(e)(l) of the Tax Code and became Section 53(d) (l) reading as follows: "(d) Withholding of final tax on interest on bank deposits, yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements. "(l) Withholding of final tax . Every bank or non-bank financial intermediary shall deduct and withhold from the interest on bank deposits or yield or any other monetary benefit from deposit substitutes a final tax equal to fifteen per centum (15%) of the interest on time deposits and twenty per centum (20%) of the interest on time deposits or yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements: Provided, however , that no withholding tax shall be made if the aggregate amount of the interest or together with another in anyone bank at any time during the taxable period does not exceed one thousand pesos (P1,000.00) a year or two hundred fifty pesos (P250.00) per quarter. For this purpose, interest on a deposit account maintained by two persons shall be deemed to be equally owned by them." The above amendment introduced by BP. Blg. 135 consists of the inclusion of the phrases "trust fund and similar arrangements" as among those the yield or any other monetary benefit of which are subject to a 20% final withholding tax. This amendment clearly indicates that yield/income from trust fund covered by investment management, heretofore subject to 20% creditable withholding tax under Revenue Regulations No. 16-81, is now subject to the 20% final withholding tax. In other words, BP Blg. 135 amended Revenue Regulations No. 16-81 insofar as the liability of yield/income from trust fund and similar arrangements to the withholding tax is concerned. cdtech Yield/income from trust fund and similar arrangement are subject to the 20% final withholding tax derived by taxpayers, whether individual or corporate, since Section 53(d) (l) of the Tax Code above-quoted, does not make any distinction. Very truly yours, RUBEN B. ANCHETA Acting Commissioner