Publishing Section 21 21 (d), 24 (cc) and 53 (d) (1) of the National Internal Revenue Code, as Amended by Presidential Decree No. 1959

October 30, 1984 REVENUE MEMORANDUM CIRCULAR NO. 31-84 SUBJECT : Publishing Section 21 21 (d), 24 (cc) and 53 (d) (1) of the National Internal Revenue Code, as Amended by Presidential Decree No. 1959 TO : All Internal Revenue Officers and Others Concerned Sections 21 (d), 24 (cc) and 53 (d) (1) of the Tax Code, as further amended by P.D. No. 1959 (effective October 15, 1984) read as follows: "Sec. 21 (d) On interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements. Interest from Philippine Currency Bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements whether received by citizens of the Philippines or by resident alien individuals, shall be subject to a 15% final tax to be collected and paid as provided in Sections 53 and 54 of this Code. "Sec. 24 (cc) Rates of tax on interest from deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements. Interest on Philippine Currency Bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements received by domestic or resident foreign corporations shall be subject to a 15% final tax to be collected and paid as provided in sections 53 and 54 of this Code. "Section 53 (d) (1) Withholding of Final Tax. Every bank or non-bank financial intermediary or commercial, industrial, finance companies, and other non-financial companies authorized by the Securities and Exchange Commission to issue deposit substitutes shall deduct and withhold from the interest on bank deposits or yield or any other monetary benefit from deposit substitutes a final tax equal to fifteen per centum (15%) of the interest on deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements." Features of the Amendments The enactment of the foregoing provisions brought about the following amendments: 1. Beginning October 15, 1984, a final withholding tax of 15% shall now be imposed on interest income from Philippine currency bank deposits, whether savings or time deposits, and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements; 2. In the case of Philippine currency bank deposits maintained by an individual, the exemption from withholding tax if the aggregate amount of the interest at any time during the taxable year does not exceed P1,000 a year or P250.00 per quarter was abolished; and 3. The exemption from withholding tax, if the recipient (individual or corporation) of the interest income is exempt from income taxation; and the imposition of the preferential tax rates if the recipient of the income is enjoying preferential income tax treatment were both abolished. cd From the foregoing amendments, it is clear that interest income on savings, as well as time deposits, are now subject to the 15% final withholding tax. The interest income of an individual depositor is subject to tax regardless of the amount thereof. The interest income is also subject to tax at the full rate of 15% even if the depositor (individual or corporation) is exempt from income taxation or is enjoying preferential income tax treatment. The deletion of the exempting and preferential tax treatment provisions under the old law is a clear manifestation that the single 15% rate is imposable on all interest incomes from deposits, deposit substitutes, trust funds and similar arrangement, regardless as to the tax status or character of the recipients thereof. Accordingly, the authority granted by this Office to depository banks to forego withholding of the tax on Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes maintained by trusteed retirement plans, persons, or entities exempt from income taxation is deemed revoked as of October 15, 1984, the effectivity date of P.D. No. 1959. Likewise, the authority granted to depository banks to withhold a preferential tax rate, e.g., 10% final tax on the interest income of private educational institutions, on the ground that the depositor enjoys preferential income tax treatment is also deemed revoked as of October 15, 1984. With respect to the non-trusteed deposit administration or insured retirement plan funds, their interest income from Philippine currency bank deposits and yield or any monetary benefit from deposit substitutes shall remain subject to the 15% final withholding tax under the aforesaid amendatory provisions of P.D. No. 1959. It is desired that this Circular be given as wide a publicity as possible. (SGD.) RUBEN B. ANCHETA Acting Commissioner