BIR Ruling No. 198-82

June 17, 1982 BIR RULING NO. 198-82 53-e 61-82 198-82 Mr. Victorio de los Reyes Barangay Captain Barangay Maybunga Maybunga, Pasig, Metro Manila S i r : This refers to your letter dated March 26, 1982 requesting that interest income from the bank deposit of Barangay Maybunga be exempt from withholding tax. In reply, please be informed that Presidential Decree No. 1177, effective July 30, 1977, 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 Barangay Maybunga is liable to income tax, the interest on its bank deposits shall be subject to the 15% withholding tax in case of savings deposit and 20% in case of time deposits and yield from deposit substitutes in accordance with Section 24(cc) in relation to Section 53(e) both of the Tax Code, as amended by Presidential Decree No. 1739. However, inasmuch as Barangay Maybunga is a government unit, 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 Budget Circular No. 289 and pars. 4, 6 and 9, Finance Circular No. 2-78, implementing Section 23, Presidential Decree No. 1177) cdti This serves as authority to the depository banks to forego withholding of the 15% tax of savings deposit and 20% in case of time deposit and yield from deposit substitutes maintained by Barangay Maybunga with them. Very truly yours, RUBEN B. ANCHETA Acting Commissioner