Tax Exemption on the Interest Income on Savings Account Being Maintained by the Roman Catholic Bishop

October 21, 1988 BIR RULING NO. 512-88 26 (e) 166-83 512-88 Gentlemen : This refers to your letter dated August 31, 1988 inquiring as to whether or not the interest income on savings account, as well as time deposits/trust funds or other deposit substitutes being maintained by the Roman Catholic Bishop of Bayombong, Bayombong, Nueva Vizcaya, being a religious institution which is non-stock, non-profit institution is subject to the 20% final withholding tax. It is represented that at present, the 20% final withholding tax is being imposed on the interest income on savings account, time deposits/trust funds and other deposit substitutes you are maintaining; and that you maintain your deposit accounts with the following banks in Nueva Vizcaya: 1. Philippine Commercial International Bank Solano Branch, Solano, Nueva Vizcaya 2. Philippine National Bank Bayombong Branch, Bayombong, Nueva Vizcaya 3. Rural Bank of Bayombong, Inc. Bayombong, Nueva Vizcaya In reply, please be informed that since you are a non-stock, non-profit religious institution, you are exempt from income tax under Section 26(e) of the Tax Code, as amended. However, pursuant to the last paragraph of said Section as amended by P.D. 1457, income of whatever kind and character of all the organizations enumerated therein derived from any of their properties, real or personal or from any of their activities conducted for profit is subject to income tax, regardless of the disposition made of such income. Accordingly, your interest income and/or yield on deposit substitute instruments and interest on savings and time deposit are subject to the 20% final withholding tax imposed under Section 24(e) of the Tax Code, as amended. It has been held that interest income earned by a religious corporation exempt from income tax under then Section 27(e) [now Section 26(e)] on its bank deposit is subject to income tax, regardless of the disposition made of such income. (The Lutheran Church Missouri Synod, the Lutheran Philippine mission, subsidiary, vs. Commissioner of Internal Revenue, CTA Case No. 2000, Nov. 17, 1972) aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner