Withdrawal of Tax Exemptions Granted to the International Institute of Rural Reconstruction

August 1, 1986 BIR RULING NO. 137-86 51 (d) (1) 006-85 137-86 Gentlemen : In reply to your letter dated July 21, 1986 please be informed that all tax exemptions and preferential tax treatments granted to the International Institute of Rural Reconstruction (IIRR) under P.D. No. 728 has been withdrawn by P.D. No. 1955 which took effect on October 15, 1984. Moreover, amending Sections 21(d), 24(cc) and 53(d)(1) of the Tax Code, P.D. No. 1959 has abolished the provisions on : (1) the exemption from the withholding tax if the aggregate amount of the interest at any time during the taxable year does not exceed P1,000 a year or P250.00 per quarter, in the case of Philippine currency bank deposits maintained by an individual, and if the recipient (individual or corporation) of such interest income is exempt from income taxation; and (2) the imposition of the preferential tax rates if the recipient (individual or corporation) of the income is enjoying preferential income tax treatment. The deletion of the exempting and preferential tax treatment provisions under the old law is a clear manifestation that the single 15% rate (now 17 1/2% beginning January 1, 1986 under P.D. No. 1994) is imposable on all interest income from deposits, deposit substitutes, trust funds and similar arrangements, regardless as to the tax status or character of the recipients thereof (Revenue Memorandum Circular No. 31-84). Such being the case, the International Institute of Rural Reconstruction is now subject to the 17 1/2% final withholding tax on interest and/or yield from deposit substitute instruments and interests on savings and time deposits paid or accrued beginning January 1, 1986. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner