Applicability of Section 2 of Revenue Regulations No. 3-82 to Investments in Treasury Bills

December 7, 1984 BIR RULING NO. 186-84 020-y-000-00-186-84 Gentlemen : This refers to your letter dated November 27, 1984 requesting clarification on the following: "1. Is Section 2 of Revenue Regulations No. 3-82 dated April 14, 1982 applicable insofar as it relates to the imposition of the fifteen per cent (15%) final withholding tax on discount earned from investments in Treasury Bills and other debt instruments of similar nature? "2. If the answer is in the negative, when should the fifteen per cent (15%) final withholding income tax be imposed? Should it be on the date of purchase of the Treasury Bills, or upon redemption of said bills." In reply thereto, I have the honor to inform you that under Subsection (b), Section 4 of Revenue Regulations No. 17-84 implementing P.D. No. 1959, the final withholding tax of 15% on yield from deposit substitutes shall be based on the gross interest or yield paid or accrued by banks, non-bank financial intermediaries, finance companies, corporations and government agencies on all of its deposit substitutes or debt instruments issued. In the case of Treasury Bills and other debt instruments maturing for less than one year, the 15% final tax on the amount earned as discount shall be withheld on the date of issuance of the debt instrument. This is so because the amount of discount at which Treasury Bills are originally sold by the Republic of the Philippines is considered interest income already earned upon issuance thereof. Accordingly, the obligation of the payor to withhold the 15% final tax arises at the time such discount is granted to the purchaser which is upon the issuance of the treasury bill. However, in the case of treasury bills with maturity of more than one year, the 15% final withholding tax shall be imposed upon redemption of said bills when the yield is paid. iatdc Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner