20% Final Withholding Tax on Trust Deposit Accounts Invested by DOLE

October 11, 1988 BIR RULING NO. 487-88 24 (e) 000-00 487-88 Gentlemen : This refers to your letter dated June 20, 1988 stating that you are currently reviewing the investment earnings of your trust deposits derived from the P2.00 levy on sugar produced; that from the levy, sugar workers avail of benefits in the form of cash bonuses and social economic projects under the Social Amelioration Program (SAP) which you supervise over the past 11 years pursuant to P.D. 621; and that the interest earnings of said investments are subjected to tax by your depository bank, the Republic Planters Bank. In connection therewith, you now request a ruling as to whether your funds in the nature of trust deposit accounts invested by the Department of Labor and Employment as trustee for and on behalf of the sugar workers are subject to tax; and that if said interest income is subject to tax, you are requesting for a tax exemption in view of the nature of the fund. In reply thereto, I have the honor to inform you that it is a cardinal rule in taxation that exemptions should be construed strictissimi juris because it is highly disfavored in law; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. (Asiatic Petroleum, Co. vs. Llanes, 49 Phil. 466) Since there is no law expressly exempting from tax the interest income of your trust deposit accounts, said interest income is subject to the 20% final withholding tax, under Section 24(e) of the Tax Code. Moreover, even assuming that your aforementioned interest income is exempt from tax, nevertheless with the issuance of Executive Order No. 93 effective March 10, 1987, withdrawing all tax and duty incentives granted to government and private entities, your aforementioned interest income will also be subject to the 20% final withholding tax. aisadc Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner