BIR Ruling No. 104-83

June 15, 1983 BIR RULING NO. 104-83 Gentlemen : This refers to your letter dated April 29, 1983 requesting confirmation of your opinion to the effect that interest payments to be made by the Scott Paper Philippines, Inc., (Scott Paper) to the State Bank of India is exempt from income tax. cd It is represented that on June 8, 1981 Scott Paper secured a US $1 million loan from the State Bank of India; that the amount is a portion of a US $4 million syndicated loan under the Loan Agreement dated June 8, 1981 and participated in by two other banks, namely: Inter-Alpha Asia (Pacific), Ltd. which provided US $1.5 million, and the National Bank of Canada (Pacific) Ltd., which also provided US $1.5 million; that the State Bank of India is an Indian Government-owned bank created pursuant to the 1955 State Bank of India Act; and that the State Bank of India is more than 90% owned by the Reserve Bank of India, a government agency which is the Central Bank of India. I reply thereto, I have the honor to inform you that income received by foreign governments, financing institutions owned, controlled or enjoying financing by foreign governments and international or regional financing institutions established by governments from their investments in the Philippines in loans, stock, bonds or other domestic securities, or from interests on their deposits in banks in the Philippines is exempt from income tax in accordance with Section 29(c) (8)(A)(1)(2) and (3) of the Tax Code, as amended. Such being the case, and inasmuch as the State Bank of India is an Indian Government-owned bank created pursuant to the 1955 State Bank of India Act and that it is more than 90% owned by the Reserve Bank of India, a government agency which is the central bank of India, this Office is of the opinion as it hereby holds that interest payments to be remitted by Scott Paper to the State Bank of India are not subject to Philippine income tax, and consequently, not also subject to the withholding tax provisions of Section 53(e)(2) in relation to Section 54 of the Tax Code. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue