Interests Income from Philippine Currency Savings and Time Deposits are Subject to 20% Income Tax

December 6, 1991 BIR RULING NO. 262-91 21 (c) (1) 1-84 262-91 S i r : This refers to your letter dated July 24, 1991 requesting for the exemption of your interest earnings from time deposits made with Metrobank and future time deposits you would eventually make during your official assignment in the Philippines. It is represented that you are an official of the International Labour Organization, a United Nations Agency; that you are attached to the Labor Population Programmed Office of the Department of Labor and Employment in Manila as an Expert; and that as such you are enjoying tax exemption privileges under the provisions of Articles VI, Section 19 of the Convention on Privileges and Immunities of the Specialized Agencies of the United Nations. In reply thereto, I have the honor to inform you that pursuant to Section 19 (b), Article VI of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, officials shall enjoy the same exemption from taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations. Under Section 18, Article VI of the Convention, only the officials of the specialized agency, e.g., ILO, whose name are included in the list of tax-exempt officials which shall from time to time be communicated and made known to the Government of member-nations are exempt from income tax in respect of the salaries and emoluments received by them from the organization. There is no showing that such communication has been made wherein your name was included; hence, your salary is not exempt from income tax and neither is the interest income earned from your bank deposits which is governed by Section 21 (c) (1) of the Tax Code, as amended, which provides, thus: "(c) Certain passive income a Tax at the rate prescribed below is hereby imposed upon the amount of the following items of gross income received by a citizen or resident alien from sources within the Philippines: (1) "Interest from Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements; . . . 20%." Such being the case, your interests income from Philippine currency savings and time deposits are subject to income tax at the rate of 20%. This tax shall be withheld by the bank and remitted to this Bureau, pursuant to Section 50 (a) of the Tax Code, as amended. However, under Section 28 (b) (8) (D), interest earned from deposits maintained with a bank under the expanded foreign currency deposit system shall not be included in gross income and shall be exempt from taxation. Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner (Officer-in-Charge)