Interest Income on Zero Coupon Peso Loan Subject to Tax on Maturity Date of the Loan

September 14, 1999 BIR RULING NO. 145-99 Sec. 44-000-00-145-99 Bureau of Treasury Intramuros, Manila Attention: Mr . Eduardo S . Mendiola Deputy Treasurer of the Philippines Gentlemen : This refers to your letter dated July 2, 1999 relative to the letter dated June 23, 1999 of the Hongkong and Shanghai Banking Corporation stating that you are now evaluating a proposal from various creditors to lend to government agency a zero coupon peso loan with a maturity period of 10 or 20 years; and that the interest on the loan shall be paid on its maturity date. In connection therewith, you are requesting confirmation of your opinion to the effect that the interest income on the said zero coupon peso loan shall be subject to tax on the maturity date of the loan. cdll In reply thereto, please be informed that pursuant to Section 44 of the Tax Code of 1997, the amount of all items of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under methods of accounting permitted under Section 43 of the same Code, any such amounts are to be properly accounted for as of a different period. Such being the case, the interest on the said zero coupon peso loan which shall be paid upon the maturity of the loan, i.e., on the 10% or 20th year, shall be subject to corporate income tax on the said periods. llcd Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue