PAL Now Subject to the 15% Final Withholding Tax on Interest on Its Savings and Time Deposits

October 25, 1985 BIR RULING NO. 188-85 24-a 000-00 188-85 Gentlemen : This refers to your letter dated July 12, 1985 requesting confirmation of your opinion to the effect that Presidential Decree No. 1931 promulgated on June 11, 1984 and its implementing regulations do not apply to the Philippine Airlines (PAL). In reply, I have the honor to inform you that pursuant to Letter of Instructions No. 1427 promulgated on September 18, 1984, P.D. No. 1931 withdrawing tax exemptions heretofore granted in favor of government owned or controlled corporations, including their subsidiaries, is not applicable to PAL. However, under P.D. No. 1590 (PAL's new franchise) which was accepted on November 28, 1984, PAL shall remain liable to pay either the basic corporate income tax or the 2% franchise tax, whichever is lower. The tax paid by PAL under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature, or description imposed by any municipal, provincial or national authority or government agency. However, in view of the amendment of Sections 24(cc) and 53(d)(1) of the Tax Code by P.D. No. 1959 (effective October 15, 1984) which abolished all kinds of tax exemptions and preferential tax treatment on interests of bank deposits, deposit substitutes, trust fund and similar arrangements, PAL shall now be subject to the 15% final withholding tax on its interest and/or yield on deposit substitute instruments, and interest on its savings and time deposits paid or accrued beginning October 15, 1984. Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner