SSS and GSIS are Subject to the 20% Final Withholding Tax on Interest Income from Philippine Currency Bank Deposits

August 11, 1992 BIR RULING NO. 219-92 24 000-00 219-92 Central Bank of the Philippines Manila Attention: Government Securities Department Gentlemen : This refers to BIR Ruling No. 24-261-86-371-87 dated November 19, 1987 addressed to you holding that E.O. No. 93 which took effect on March 10, 1987 did not withdraw the exemption of the Social Security System (SSS) and the Government Service Insurance System (GSIS) from income tax and consequently from the 20% final withholding tax on interest income derived from bank deposits and yield derived from deposit substitutes; hence, no withholding of the 20% final tax shall be made by CB and other depository banks from interest income derived by the GSIS or by the SSS from their bank deposits or yield and other monetary benefits derived from their investments in deposit substitutes. In connection therewith, after a restudy of the applicable laws and jurisprudence, this Office finds BIR Ruling No. 24-261-86-371-87 dated November 19, 1987 devoid of legal basis. In the case of the GSIS, while it is exempt from all taxes under its Charter, as amended by P.D. No. 1146, said tax exemption was, however, abolished/withdrawn by P.D. Nos. 1177 and 1931 and E.O. Nos. 93 and 273 in view of the continuing policy of the State to abolish tax exemptions of government-owned and controlled corporations. Likewise, in the case of the SSS, while it is exempt from all kinds of taxes, fees, charges, etc. under its Charter (R.A. No. 1161 as amended by P.D. No. 24), said tax exemption was, however, abolished/withdrawn by P.D. Nos. 1177 and 1931 and E.O. Nos. 93 and 273. Accordingly, in our letters dated March 19, 1991 (xerox copy attached) both GSIS and SSS were informed of the above findings and revocatory ruling denying their respective claims for tax refund. In view of the foregoing consideration, this Office is of the opinion as it hereby holds that SSS and GSIS are subject to the 20% final withholding tax imposed by Section 24 (e) (1) in relation to Section 50(a) of the Tax Code as amended on their interest income from Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes, trust fund and similar arrangements. This revokes BIR Ruling No. 24-261-86-371-87 dated November 19, 1987. prcd Very truly yours, JOSE U. ONG Commissioner of Internal Revenue