Exemption of CARE from the 20% Final Withholding Tax on Interest Income of Its Savings and Time Deposits and the Refund of the Income Taxes Withheld Therefrom

November 16, 1987 BIR RULING NO. 364-87 29 (b) (6) 237-87 364-87 Gentlemen : This refers to your letters dated July 25, 1985, October 22 and December 12, 1986 requesting exemption from the 20% final withholding tax on interest income of your savings and time deposits and the refund of the income taxes withheld therefrom in the amount of P50,842.46. Documentary evidence submitted show that the Cooperative for American Relief Everywhere, Inc. (CARE) a non-profit, private organization made up of 26 American relief, religious, labor, civic and cooperative agencies, provides a way for the American people, through their voluntary contributions to express their friendship for the people of other countries by extending direct assistance in the form of relief, rehabilitation and reconstruction equipment and material; and that in an Agreement executed by and between the Government of the Philippines and CARE, on August 1, 1983, it is specifically provided that the government will not levy taxes on CARE, its assets, property, receipts, operations or the salaries or other remuneration for personal services paid by CARE to its personnel of non-Philippine Nationality. In reply thereto, please be informed that your request is hereby granted. Pursuant to Section 29(b)(6) of the Tax Code as amended, income of any kind, to the extent required by any treaty obligations binding upon the Government of the Philippines shall not be included in gross income and shall be exempt from Philippine income tax. Such being the case, the interest earnings of your savings and time deposits are exempt from the 20% final withholding tax prescribed under Section 24(e) of the Tax Code, as amended. This serves as authority for the depository banks to forego the withholding of the 20% tax imposed on interest income from bank deposits and on the interest and/or yield from deposit substitute instruments maintained by CARE Philippines with them. As regards to your claim for refund, appropriate action shall be taken thereon. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner