Whether DBP Can Credit All Taxes Due on Its Income and Other Transactions in Payment of Govt. Subscription to Its Capital Stock

August 22, 1985 BIR RULING NO. 127-85 54 000-00 127-85 Gentlemen : This refers to your letter dated August 1, 1985 relative to P.D. 1980 dated July 18, 1985, which provides that the amount of taxes due to the National Government on income beginning with calendar year 1978, as well as taxes due on all other transactions of the Bank, beginning with calendar year 1985 shall be automatically applied to the payment of the subscribed capital stock of the government in the Bank. On the basis thereof, you now request for information if DBP can credit all the taxes due on its income and other transactions as enumerated in your said letter, in payment of the government's subscription to the capital stock of the Bank. In reply, thereto, I have the honor to inform you that only the taxes for which DBP is directly liable i.e., corporate income tax, gross receipts tax, privilege tax, 1% foreign exchange transaction tax, as well as documentary stamp tax when assumed and payable by the Bank, may be applied in payment of the subscribed capital stock of the government with that Bank as prescribed in P.D. No. 1980. Contractor's, and other taxes withheld from money payments by government institutions, withholding tax on salaries and wages, expanded withholding tax deducted from income payments, 15% final withholding tax on depositor's interest income on bank deposits and deposit substitutes, 15% withholding tax on foreign borrowings as well as the 35% withholding tax on non-resident foreign corporations, are taxes to be deducted and withheld by the withholding agent, like DBP, and shall be held as a special fund in trust for the Government until paid to the BIR collecting officers, in accordance with Section 54 of the Tax Code, as amended by Batas Pambansa Blg. 41. As such, they cannot, therefore, be applied in payment of the National Government's subscription to DBP's capital stock. On the other hand, realty tax on properties, transfer tax, registration fees of vehicles and residence tax being local taxes, are not also applicable in payment of the government subscription to the capital stock of DBP. In this connection, where the aforementioned taxes due and creditable are to be applied in payment of the National government's subscription, it is required that a request for application thereof, together with the copies of the corresponding tax returns be filed by DBP with the Chief, Receivable Accounts Division, this Bureau, who after determining the correctness of the mathematical computation of the tax shall issue the corresponding tax credit memo, specifying therein that the tax due and credited shall be applied in payment of the subscribed capital stock of the government. Within forty-five days from receipt of the Tax Credit Memo, DBP shall cause the entry in its stock book of the paid-in capital stock and the issuance of the corresponding certificates of stock in favor of the National Government. Advise of this action should be sent to this Office for our guidance. cdtech Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner