Whether Interest Income from Philippine Currency Bank Deposits Are Subject to Withholding Tax

August 7, 1986 BIR RULING NO. 146-86 51-d-1 005-85 146-86 Gentlemen : This refers to your letter dated July 25, 1985 requesting a ruling as to whether or not interest income from Philippine currency bank deposits whether savings or time deposits, and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements of your clients, Nonoc Mining and Industrial Corporation (Nonoc Mining) and the Maricalum Mining Corporation (Maricalum Mining) are subject to the 15% (now 17 1/2% withholding tax). Pursuant to the provisions of R.A. No. 1828 as amended, P.D. No. 1887, and the Operating Contract, Nonoc Mining is exempt from all taxes, duties, fees and charges, both national and local, until December 31, 1988 (See letter dated November 13, 1984 of the Minister of Finance); and that pursuant to LOI No. 1416, Maricalum Mining is entitled to the suspension of the payment of all taxes, duties, fees, imposts and other charges, whether direct or indirect. (See Certificate of Eligibility to Suspend Payment dated December 4, 1984 of the Minister of Trade and Industry). In reply, please be informed that the amendment of Sections 21(d), 24(cc) and 53(d)(1) [(now Secs. 24(d) and 51(d)(1)] of the Tax Code, by 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 tax treatment. The deletion of the exempting and preferential tax treatment provisions under the old Law is a clear manifestation that the single 15% (now 17 1/2%) rate 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. 51-84). cdtech Moreover, under Ministry Order No. 39-84 of the Ministry of Finance clarifying the scope of P.D. No. 1955, any exemption from or preferential treatment in the tax on interest from bank deposits and yield or any other monetary benefit from deposit substitutes, trust funds and other similar arrangements shall remain withdrawn, pursuant to the above-cited provisions of the Tax Code. Such being the case, Nonoc Mining and Maricalum Mining are still subject to the 15% final withholding tax on interest on their savings and time deposits and yield or any other monetary benefit from deposit substitutes, trust funds and other similar arrangements earned or accrued beginning October 15, 1984; 17 1/2% beginning January 1, 1986 pursuant to Section 24(d) in relation to Section 51(d)(1) of the Tax Code, as amended by P.D. No. 1994; and 20% beginning August 1, 1986 pursuant to Section 24(c)(1) of the Tax Code as amended by Executive Order No. 37. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner