Income Derived from the Central Bank's Certificates of Indebtedness are Not Exempt from Taxation

November 25, 1987 BIR RULING NO. 379-87 19 000-00 379-87 Gentlemen : This refers to your letter dated April 7, 1987 requesting opinion as to whether the 5-year Central Bank Certificates of Indebtedness (CBCI) 23rd series issued pursuant to Section 98 of R.A. No. 265 (CB Charter), as amended, are exempt from income taxes. In reply, I have the honor to inform you that Section 98 of R.A. No. 265 under which the aforesaid CBCI's were issued does not provide for exemption from income tax. Consequently, and since no law has been cited to justify tax exemption, this Office believes, and so holds, that income derived from CBCI's are not exempt from taxation. In this connection, it is noted that the aforesaid CBCI's are considered deposit substitutes. [(Sec. 20(y), Tax Code, subparagraph (b) of Sec. 2(h), Revenue Regulations No. 17-84)] Accordingly, the yield or monetary benefit derived from said CBCI's are subject to the 20% withholding tax, pursuant to Sections 21(c)(1) and 24(e)(1) of the Tax Code, in relation to Section 21(a) of the same Code. Very truly yours, (SGD.) EUFRACIO D. SANTOS Officer-in-Charge