Interest Income Derived by PAL Employees' Savings and Loan Association, Inc. from Deposit and Deposit Substitutes Exempt from Twenty Percent (20%) Final Withholding Tax

December 29, 1997 BIR RULING NO. 138-97 R.A. 8367 000-00 138-97 PAL Employees' Savings and Loan Association, Inc. PAL Gate 1 Nichols Field, Andrews Avenue Pasay City Attention: Mr . Miguel J . Villaor President Gentlemen : This refers to your letter dated December 3, 1997 requesting for exemption from the twenty percent (20%) final withholding tax on interest income from deposit and deposit substitutes with a bank in the light of the provision of Section 5 of Republic Act No. 8367, approved on October 21, 1997 and which took effect on November 14, 1997. In reply, please be informed that Section 5 of Republic Act No. 8367 entitled "An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations", provides, viz.: "Sec. 5. Tax Exemption . An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank; Provided , however , That income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code. Interest earnings on deposits of members with Associations, as well as the shares of its members from the net income of the Associations shall be exempt from income tax." Based on the foregoing, interest income derived by the PAL Employees' Savings and Loan Association, Inc. from its deposit and deposit substitutes are exempt from the twenty percent (20%) final withholding tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue