Interest Income of Northwest Airlines Inc. from Its Savings and Other Deposits in the Philippines Subject to 15% Tax

August 23, 1985 BIR RULING NO. 135-85 24-cc 000-00 135-85 Gentlemen : This refers to your letter dated February 24, 1984 requesting a certificate of preferential tax treatment on your interest on savings and other deposits. It is represented that Northwest Airlines, Inc. ("Northwest") operated in the Philippines, as a foreign corporation engaged in air transportation in international traffic, and part of its income consists of interest on savings and other deposits. In reply, please be informed that under the U.S. Reservation No. 2, in the RP-US Tax Treaty in relation to Article 9 thereof, it is provided that the tax on profit derived by a resident of the United States from sources within the Philippines from the operation of aircraft in international traffic shall not exceed 1-1/2% of the gross revenue thereof. On the other hand, under Section 24(cc) of the National Internal Revenue Code, as amended by P.D. 1959, "Interest on Philippine Currency Bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements received by domestic or resident foreign corporations shall be subject to a 15% final tax to be collected and paid as provided in Section 53 and 54 of this Code." This 15% tax is also provided for in Article 12(2) of the RP-US Tax Treaty. Wherefore, the interest income of Northwest Airlines Inc. from its savings and other deposits in the Philippines not being profits from the operation of aircraft in international traffic is thus subject to 15% tax in accordance with Section 24(cc) of the NIRC, as amended by P.D. 1959. cdt Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner