Interest Income on Philippine Currency Bank Deposits Subject to FWT Not Includible in Gross Income

September 30, 1986 BIR RULING NO. 200-86 29-b 000-00 200-86 Gentlemen : This refers to your letter dated January 23, 1986, requesting confirmation of your opinion to the effect that interest income from Philippine currency bank deposits subjected to the 17 1/2% (now 20% beginning August 1, 1986) final withholding tax should not be included in the gross income of EPZA firms like the Antistatic Product Specialist, Inc. (APSI) for purposes of the availment of the net operating loss carry-over incentive under Section 18(a) of P.D. 66 as amended. In reply thereto, please be informed that under Section 18(a) of P.D. 66, as amended which provides in part as follows: "Section 18 Additional Incentives A zone registered enterprise shall also enjoy the following incentive benefits: "(a) Net-Operating Loss Carry Over A net operating loss incurred in any of the first five years of operation inside the zone may be carried over as a deduction from taxable income derived in such zone during the five years immediately following the year of such loss. The entire amount of the loss and any portion of such loss which exceed the taxable income of such first year shall be deducted in like manner from the taxable income of the next remaining four years. The net-operating loss shall be computed in accordance with the provisions of the National Internal Revenue Code, any provision of this Decree to the contrary notwithstanding, except that income not taxable either in whole or in part under this Decree or other laws shall be included in gross income ". (Emphasis supplied) your opinion is hereby confirmed. It is noted that under the above-quoted provision, net operating loss shall be computed in accordance with the provision of the National Internal Revenue Code. Accordingly, as regards interest income on Philippine currency bank deposits which is subject to the final withholding tax, the same is not includible in gross income. (Sec. 29(b), Tax Code). Moreover, under the above-quoted provision, only the income which is not taxable should be included in gross income. Accordingly, since said interest income is taxable the same should not be included in gross income. cdta Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner