Interest Earnings of Rural Banks Subject to Final Withholding Tax

April 12, 1993 BIR RULING NO. 130-93 INTEREST EARNINGS OF RURAL BANKS SUBJECT TO FINAL WITHHOLDING TAX 24 (a); (e) 00-00 30-93 Metropolitan Bank & Trust Company Metrobank Plaza Sen. Gil J. Puyat Avenue Makati, Metro Manila Attention: Mr . Antonio V . Viray First Vice President Law Division This refers to your letter dated August 5, 1992, requesting a ruling as to whether rural banks are subject to the final withholding tax on interest earnings from deposits and deposit substitutes. In reply, please be informed that as provided for under Section 15 of Republic Act No. 7353 otherwise known as the Rural Banks Act of 1992, all rural banks created and organized under the provisions of said Act shall be exempt from the payment of all taxes, fees and charges of whatever nature and description, except the corporate income tax. The term "corporate income tax" refers not only to the 35% tax imposed under Section 24(a) of the Tax Code but also to the 20% tax on interest on Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements and royalties derived from sources within the Philippines under paragraph (e) thereof. Your query is, therefore answered in the affirmative. cdt EUFRACIO D. SANTOS Deputy Commissioner of Internal Revenue