BIR Ruling No. 285-82

November 16, 1982 BIR RULING NO. 285-82 29-c-8 183-82 285-82 Private Development Corporation of the Philippines PDCP Building, 6758 Ayala Ave. Makati, Metro Manila Attention: Mr . Luis V . Z . Sison Executive Vice-President Gentlemen : This refers to your letter dated August 10, 1982, requesting a ruling to the effect that the interest income which will be received by Societe Belge D' Investissement International (SRI) from the Private Development Corporation of the Philippines (PDCP) is exempt from income tax. It is represented that PDCP intends to borrow Belgian Francs equivalent to P10,314,000.00 Philippine Currency from SBI for relending by PDCP to qualified investment enterprises (or sub-borrowers) in the Philippines; that the PDCP borrowings shall be evidenced by PDCP debentures to be purchased by SBI, if SBI approves the development project to be financed with the proceeds of such debentures; that 55% of SBI's capital stock is owned by Societe National D' Investissement (SNI); and that SNI is wholly owned by the Government of Belgium. In reply thereto, I have the honor to inform you that income received by foreign governments, financing institutions owned, controlled , or enjoying refinancing by foreign governments and international or regional 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. In the instant case, since SBI is 55% owned by SNI which, in turn, is wholly owned by the Government of Belgium, SBI could be considered as controlled by said foreign government. A controlled corporation may be defined as a corporation more than fifty per cent (50%) of whose total combined voting power is owned by the shareholder(s) alleged to be in control in the particular case. Accordingly, the interest payments which will be remitted to SBI by PDCP are not subject to Philippine income tax, and consequently, not also subject to the withholding tax provisions of Section 53(b) (2) in relation to Section 54 of the Tax Code. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner