Interest Earned on Bank Deposits of Cooperatives is Subject to 20% Final Withholding Tax

September 13, 1991 BIR RULING NO. 187-91 24 (e) (1) 123-91 187-91 Gentlemen : This refers to your letter dated April 8, 1991 which was referred to this Office by the BIR Regional Director of Revenue Region No. 11-3, Davao City, requesting comments/remarks on the allegation of a cooperative that the interest earned on deposits with your bank is exempt from withholding tax under the provisions of Republic Act No. 6938 otherwise known as the Cooperative Code of the Philippines. In reply, please be informed that the interest income of cooperatives from Philippine currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements remain subject to the 20% final withholding tax under Section 24 (e) (1) of the Tax Code, as amended, notwithstanding the provisions of Article 61 and 62 of the Cooperative Code. This is so, because the exemption granted to cooperatives by the said Code does not apply to taxes on income not arising from cooperative productive activity, such as interest on bank deposits, among others. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge