ITAD Ruling No. 083-01

October 2, 2001 ITAD RULING NO. 083-01 Sec. 24 (B) (1) Tax Code of 1997 Sec. 2.24 RR 10-98 DA-ITAD 52-01 Mrs. Ma. Esther Feliciano-Cruz 41 Cecilleville St., White Plains Quezon City Dear Mrs. Feliciano-Cruz, This refers to your letter dated 25 June 2001 requesting for a ruling on the exemption from the 7.5% final tax on interest income of the foreign currency deposits of your daughter, Anna Cristina Cruz-Gayla, and your sister, Beatrice R. Feliciano. It is represented that Anna Cristina Cruz-Gayla is the holder of Passport No. GG305949 issued on December 12, 2000 by the Philippine Consulate General in New York expiring on December 5, 2005; that she is living in US with her husband and daughter; that her husband is employed in the US; that on the other hand, Beatrice R. Feliciano is an American citizen and is the holder of American Passport No. 154099327 issued on April 5, 1996 expiring on April 4, 2006; and that Anna Cristina Cruz-Gayla and Beatrice R. Feliciano are being requested by certain banks here in the Philippines, particularly Metrobank, to secure a certification from this Bureau of their exemption from 7.5% final tax on their dollar deposits. In reply, please be informed that under Section 24 (B)(1) of the National Internal Revenue Code of 1997, interest income received by a non-resident individual from a depository bank under the expanded foreign currency deposit system shall not be subject to the final income tax of 7%. Furthermore, Section 2.24 of Revenue Regulation No. 10-98 (the Regulations implementing the said provision) provides, viz: "Sec. 2.24 Income Tax Rate of Interest Income from Foreign Currency Deposit "xxx xxx xxx "(B) Compliance and Administrative Procedures for Non-Resident Citizen and Non-Resident Alien The tax on interest income from foreign currency deposit shall be imposed unless the depositor who is a non-resident citizen or a non-resident alien can present documentary evidence that he is not a resident of the Philippines. Such evidence shall consist of the original or certified copy of any of the following: "(1) an immigration visa issued by the foreign government in the country where he is a resident of; or "(2) a certificate of residency which is issued by the Philippine Embassy or Consulate in the Foreign Country of his residence; or "(3) a certificate of the contract of employment of an overseas contract worker which is duly registered with the Philippine Overseas Employment Agency (POEA); or a Seaman's Certificate, in the case of Filipino seaman; or "(4) a certification from the Bureau of Immigration of the Philippines that a non-resident alien is not a resident of the Philippines; or "(5) a certification from the Department of Foreign Affairs (DFA) of Philippines that the individual is a regular member of the diplomatic corps of a foreign government and is entitles to income tax exemption under an international agreement which the Philippines is the signatory." Based on the foregoing, the interest income which may be derived from foreign currency deposit in the Philippines of a non-resident individual shall be exempt from the final withholding tax of 7 1/2% upon compliance with the requirements of Revenue Regulation No. 10-98. Thus, upon presentation of any of the above-mentioned documentary evidence of Anna Cristina Cruz-Gayla and Beatrice R. Feliciano (or of their duly authorized representative) to the concerned bank, the latter shall not withhold the 7% income tax on their interest income from the said Foreign Currency Deposits. This ruling is issued based on the foregoing facts as represented. If upon investigation, it will be disclosed that the said facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group