BIR Ruling No. 164-84

October 1, 1984 BIR RULING NO. 164-84 24 (cc)-056-83-164-84 Gentlemen : This refers to your letter dated December 8, 1983 requesting that the interest income and earnings of the investable funds of the Philippine Veterans Assistance Commission (PVAC) be exempt from the withholding tax under Section 24 (cc) of the Tax Code as amended. It appears that the Philippine Veterans Assistance Commission (PVAC), a corporate body and politic, was created under Presidential Decree No. 224 effective July 12, 1973, charged with the duty to establish, maintain and make available for Philippine Veterans and their dependents such services to provide them assistance for employment, medical care, education and other related services: that the funds of PVAC come from contributions and donations of private persons and government agencies or institutions; that annually in January a public report is submitted to the President covering its activities in the administration and enforcement of said Decree; that the total income or earnings from investments of the fund collections are used to finance various services provided therein for veterans and their dependents, and that all the accounts, funds and properties of the Commission are checked and audited by the Commission on Audit. In reply, I have the honor to inform you that Presidential Decree No. 1177 requires all government units, government owned or controlled corporations to pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws (See Opinion No. 133, S. 1977, Secretary of Justice). Accordingly, since the PVAC is liable to income tax, the interest income of its bank deposits are subject to the 15% withholding tax in case of savings deposits and 20% withholding tax in the case of time deposits and yield from deposit substitutes in accordance with Section 24 (cc) in relation to Section 53 (d)(1) both of the Tax Code, as amended. However, inasmuch as the PVAC is a government agency, it is entitled to either a tax subsidy or payments constituting equity contributions in which case, it shall not be required to pay cash or its equivalent. The revenue collecting agencies shall instead issue a "Payment Compliance Certificate" indicating the nature of the assessment and amount due. The subsidy shall be effected through journal vouchers or their equivalent. (See Joint Budgets Circular No. 289 and paragraphs 4, 6 and 9, Finance Circular No. 2-78, implementing Section 23 of P.D. No. 1177). This serves as authority of the depository banks to forego the withholding of the 15% tax on interest income of savings deposits and 20% tax in case of time deposits and yield from deposit substitutes maintained by the PVAC with them. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner