Interest Income of Foundation from Bank Deposits Subject to 20% Final Tax

May 11, 1993 BIR RULING NO. 204-93 INTEREST INCOME OF FOUNDATION FROM BANK DEPOSITS SUBJECT TO 20% FINAL TAX 26 (e) & (g) 000-00 204-93 Saint Louis University Extension Institute for Small-Scale Industries Foundation, Inc. B-101 J. Burgos Center SLU Campus, Baguio City Attention: Ms . Erlinda T . Manopol Executive Director/Vice President This refers to your letters dated August 24, 1992 and January 12, 1993, requesting exemption from the 20% tax on interest and/or yield on deposit substitute instruments and interest on Philippine currency savings and time deposits, dividends, gains from investments in stocks, money market placements, treasury bills; and from customs duties on importation of equipment and facilities to be actually, directly and exclusively used by your Foundation. cdt It is represented that you are a non-stock, non-profit corporation, duly registered with the Securities and Exchange Commission for the following purposes, among others: to participate in the promotion and development of livelihood projects in the region through skill training and development; to provide students in commerce and engineering practical training in small business management; to conduct a continuing program of consultancy and extension services to micro, cottage and small-scale owners-managers in the region; to conduct seminars or mini-courses for small-scale owners. Mini-courses will cover the functional an operational areas of small enterprise management; to publish studies and other informational materials that will help small owner-managers in managing their firms; to undertake continuous cooperative education for credit beneficiaries as a means of institutionalizing a community credit project for continuity and self-reliance of beneficiaries; and that this Office issued in your favor on July 18, 1988, a certificate of exemption from income tax pursuant to Section 26 (e) and (g) of the Tax Code, as amended. In reply, please be informed that the last paragraph of Section 26 of the Tax Code, as amended, provides as follows: "Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to tax imposed under this Code." Accordingly, interest income derived by your Foundation from Philippine currency bank deposits and yield or any other monetary benefit from deposits, substitute instruments, e.g., money market placements and treasury bills, trust fund and similar arrangements are subject to the 20% final tax imposed under Section 24(e) (1) of the Tax Code, as amended. The Foundation shall, however, be exempt from the tax on intercorporate dividends but subject to the income tax rates imposed under Section 24(e)(2) of the same Code on the sale, exchange or disposition of shares of stock. With regard to customs duties on your importation of equipment and facilities, your request should be addressed to the Bureau of Customs which has jurisdiction on the matter. cdtech VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue