ITAD Ruling No. 020-03

January 30, 2003 ITAD RULING NO. 020-03 Section 32 (B) (7) (a) National Internal Revenue Code of 1997 BIR Ruling DA-267-7-22-96 Monetary Authority of Singapore 10 Shenton Way MAS Building Singapore 079117 Attention: Ms. Geraldine Toh For the Executive Director Finance Department Gentlemen : This refers to your letter dated August 2, 2002 seeking confirmation that the Monetary Authority of Singapore (Authority) is exempt from income tax on dividends and interest it derived in the Philippines pursuant to Section 32 of the National Internal Revenue Code of 1997. It is represented that the Authority is a body corporate of the Government of Singapore (Government) established under the Monetary of Singapore Act of 1970 effective on December 26, 1970, with authorized capital of $100 million; that the principal objects of the Authority are to: 1. Act as banker and financial agent of the Government; 2. Promote, within the context of the general economic policy of the Government, monetary stability and credit and exchange conditions conducive to the growth of the economy; 3. Foster a sound and progressive financial services sector; and 4. Exercise and perform the powers, duties and functions of the following offices in Items (a), (b) and (c) transferred to it as of January 1, 1971, and in Items (d) and (e) transferred to it as of September 21, 1984: (a) the Minister for Finance, the Commissioner of Banking and the Accountant-General under the Banking Act; (b) the Minister for Finance, the Commissioner for Finance Companies and the Accountant-General under the Finance Companies Act; (c) the Minister for Finance and the Controller of Foreign Exchange under the Executive Control Act; (d) the Commissioner of Insurance under the Insurance Act; and (e) the Registrar of Companies and the Accountant-General under the Securities Industry Act. That pursuant to its function of acting as banker and financial agent of the Government, the Authority may invest its funds, among others, in securities and investments as may be authorized by the President of the Authority on the recommendation of the Board of Directors thereof; that relative thereto, the Authority maintains substantial shareholdings in the Philippines under the custody of the Standard Chartered Bank Manila ; that these shareholdings (Account No. SSAL fund AUS-7FAF) represent 11,000,000 shares in Ayala Land, Incorporated at P5.90 per share and 1,410,000 shares in the Bank of the Philippine Islands at P44.50 per share. In reply, please be informed that pursuant to Section 32 (B)(7)(a) of the National Internal Revenue Code of 1997 , "income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from foreign governments, and (iii) international or regional financial institutions established by foreign governments" shall not be included in the gross income of these entities and shall be exempt from income tax. According, inasmuch as the Authority is financial institution owned and controlled by the Government of Singapore under Item (i), dividends derived on such shareholdings in Ayala Land, Incorporated and Bank of the Philippine Islands are exempt from income tax in the Philippines. ( BIR Ruling DA-267-7-22-96 ) SHaIDE This ruling is issued based on the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner, Legal Service