Interest of Savings Deposits of Samahang Magsasaka, Inc. Not Subject to 15% Final Withholding Tax

May 8, 1984 BIR RULING NO. 092-84 024-cc-167-81-092-84 Gentlemen : This refers to your letter dated March 14, 1984 requesting for a ruling regarding the tax to be imposed on the interest of your savings deposits which you maintain in relation to your electric operation. It is represented that Samahang Magsasaka, Inc. (SMI) is a grantee of a legislative franchise under Republic Act No. 3118, to construct, maintain and operate an electric light, heat and power system for the purpose of generating and distributing electric light, heat and power for sale within the City of Cabanatuan, subject to the provisions of Act No. 3636, which states that the payment of franchise tax is in lieu of all taxes and assessment of any kind and nature whatever. In reply, I have the honor to inform you that interest income which accrues on your savings deposits represents profit made in the course of regular transactions in connection with the franchise, hence, subject to the franchise tax of 2% under paragraph (b) Section 267 of the National Internal Revenue Code, as amended. Unlike interests income from time deposits and deposit substitutes which are considered extraneous income not subject to franchise tax, but to income tax, interest income of savings deposits are not subject to income tax, and consequently, not also subject to the final withholding tax of 15% imposed by Section 24(cc) in relation to Section 53(d)(1) both of the Tax Code, as amended. This serves as authority of depository banks to forego the withholding of 15% final tax on interest of savings deposits maintained by Samahang Magsasaka, Inc. with them. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner