Whether the Interest paid on Borrowings or Loans from Investors are Subject to Withholding Tax

May 18, 1992 BIR RULING NO. 148-92 50 (b) 141-90 148-92 Tamaraw Lending Investor, Inc. Calapan, Oriental Mindoro Attention: Mr . Leopoldo Dela Cruz President Gentlemen : This refers to your letter (certified copy only) dated August 30, 1989 stating that as a lending investor, you borrow and lend out money; that your creditors are called investors who may be natural or juridical persons, including banks, and you pay them a certain percentage of their money which you used in your lending operations. Based on the foregoing, you request a ruling as to whether the interest paid on your borrowings or loans from your investors are subject to the withholding tax. In reply, please be informed that only payments to persons enumerated in Revenue Regulations No. 6-85, implementing Section 50 (b) of the Tax Code, as amended, are subject to the expanded withholding tax. Considering that interest payments for loans and other borrowings are not among those specified in said Regulations, such payments are not, therefore, subject to the expanded withholding tax. However, borrowings of lending investors thru commercial papers issued as evidences of indebtedness whether or not registered with the Securities and Exchange Commission, regardless of maturity period and with or without recourse basis are considered deposit substitutes pursuant to Section 2 (h) (ii) of Revenue Regulations No. 17-84; hence, earnings or yield from such deposit substitutes are subject to 20% withholding tax imposed under Section 21 (c) (1) or 24 (e) (1), both of the Tax Code, as amended. aisadc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue By: EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge