BIR Ruling No. 185-82

May 24, 1982 BIR RULING NO. 185-82 24-cc 140-81 185-82 Intermodal Shipping Agencies Delmar Building 1136-1138 United Nations Avenue Paco, Manila Attention: Mr . Vicente J . Brillantes President Gentlemen : This refers to your letter dated April 2, 1981 on behalf of Zamboanga Carriers, Inc. requesting exemption from the withholding tax on interest income derived by them from savings deposits and money market placements under Section 24(cc) of the Tax Code, as amended by Presidential Decree No. 1739. cd The basis of your request is Sec. 2, R.A. No. 1407, as amended by Presidential Decree No. 764, which provides as follows: "Sec. 2. In pursuance of the above-declared policy, any citizen of the Philippines, or any association or corporation organized under the laws of the Philippines, at least sixty per cent of the capital of which is owned by citizens of the Philippines engaged or which shall engage exclusively in overseas shipping business or in the construction of modern boats for overseas service shall be exempt from the payment of income tax on income derived from his or its overseas shipping business for a period of thirty years from the date of approval of this Act or until September nine, nineteen hundred and eighty-five; Provided, that they shall invest the entire net income, after deducting not more than ten per cent thereof for distribution to the stockholders or partners, realized during the period of exemption, which would otherwise have been taxable under the provisions of Title II of the National Internal Revenue Code, in the construction, purchase, or acquisition of vessels and equipment. The amount so invested shall not be withdrawn for a period of thirty years after the expiration of the period of income tax exemption or until after the vessels and equipment so acquired had been fully paid for . Any amount so withdrawn before the end of this period shall be subject to the corresponding income tax, including surcharges and interests." (Emphasis supplied) In reply thereto, please be informed that the aforequoted provision of law limits the tax exemption to income derived from the overseas shipping business. Accordingly, the interest income on savings deposits and on money market placements of Zamboanga Carriers, Inc. being extraneous income derived from sources other than the overseas shipping business shall be subject to 15% final withholding tax in the case of savings deposits and 20% in case of money market placements pursuant to Section 24(cc) in relation to Section 53(e) of the Tax Code, as amended. Very truly yours, RUBEN B. ANCHETA Acting Commissioner