BIR Ruling No. 227-83

December 15, 1983 BIR RULING NO. 227-83 Gentlemen : This refers to your letter dated August 31 and October 5, 1983 requesting confirmation of your opinion to the effect that the interest income derived by the International Finance Corporation (IFC) on its loan investment in the Philippines is exempt from income tax. It is represented that the Private Development Corporation of the Philippines (PDCP) had obtained from IFC a foreign currency loan in the amount of fifteen million dollars (US$15,000,000.00) for relending by PDCP to economic development projects in the Philippines; that IFC is an affiliate of the World Bank; that IFC is an International financing institution established by governments; and that one of the signatories to the Articles of Agreement establishing the IFC is the government of the Republic of the Philippines (Republic Act No. 1604) which paid the amount of P332,000.00 as its subscription to the capital stock of IFC (Republic Act No. 1926) Section 9 of the said Articles of Agreement provides that IFC, its assets, property, income and its operations and transactions shall be immune from all taxation. In reply, please be informed that income received by international financing institutions established by governments from their investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on their deposits in banks in the Philippines is exempt from income tax in accordance with Section 29(c)(8)(A)(1)(2) and (3) of the Tax Code, as amended. Such being the case, since IFC is an international financing institution established by governments and in view of the immunity from taxation accorded IFC by member countries, this Office is of the opinion as it hereby holds that interest payments to be remitted by PDCP to IFC are not subject to Philippine income tax, and consequently, not also subject to the withholding tax provision of Section 53(e)(2) in relation to Section 54 of the Tax Code. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue