Bonds Not Issued as Money Market Instruments and Not Classified as "Commercial Papers" Subject to 35% Transaction Tax

July 28, 1980 BIR RULING NO. 113-80 Western Minolco Corporation 231 Salcedo Street Legaspi Village, Makati Metro Manila Attention: Mr . Arthur N . Aguilar Treasurer Gentlemen : This refers to your letters dated July 9 and December 18, 1979, requesting confirmation that the WMC bonds worth P120 million to be issued by that firm are not subject to the 35% transaction tax imposed by Section 210(b) of the Tax Code of 1977, as amended. cdti It is represented that the said bonds will have a maturity of at least 10 years and the partial repayments of the principals will not be earlier than 1984 or approximately 5 years from issue date; and that they are issued on the basis of an integrated long-term financial plan approved by the creditors of that firm to rehabilitate it and insure its continued operations in the future. In reply, I have the honor to inform you that under the foregoing facts, the WMC bonds are not being issued as money market instruments; hence, said bonds do not come within the purview of the term "commercial papers" intended to be subject to the 35% transaction tax prescribed by Section 210(b) of the National Internal Revenue Code, as amended. Accordingly, WMC is not subject to the 35% transaction tax on its issue of the aforesaid bonds. However, those buying the said bonds should be made aware of the fact that the transaction tax is not being imposed on the issuer of such bonds by printing or stamping thereon in bold letters the following statement: "ISSUER NOT SUBJECT TO TRANSACTION TAX UNDER SECTION 210(b), TAX CODE OF 1977, AS AMENDED." Bondholders/purchasers of said notes are however subject to income tax on interest and/or gains derived from their investments or transactions in said bonds, and therefore, income payments by the WMC to the holders thereof shall be subject to the expanded withholding tax of 15% pursuant to Section 1 (h) of Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79. In complying with the withholding requirements of the abovementioned Regulations, WMC is required to furnish each individual payee a written statement (BIR Form 1743) showing the income payment made by it and the amount of taxes deducted and withheld therefrom, pursuant to Section 6 of Revenue Regulations No. 13-78, as amended. Very truly yours, RUBEN B. ANCHETA Acting Commissioner