Amending Revenue Regulations No. 12-80 Governing the Taxation of Certain Income Derived from Banking Activities

April 9, 1981 REVENUE REGULATIONS NO. 08-81 SUBJECT : Amending Revenue Regulations No. 12-80 Governing the Taxation of Certain Income Derived from Banking Activities TO : All Internal Revenue Officers and Others Concerned SECTION 1 . Scope . Pursuant to the provisions of Section 16 of P.D. 1739 and Section 326 in relation to Section 4 of the National Internal Revenue Code, as amended, these regulations are hereby promulgated to amend certain sections of Revenue Regulations No. 12-80 which provide for the manner of taxation of certain income derived from banking activities. SECTION 2 . Subsection (g) of Section 2 is hereby amended to read as follows: "Sec. 2(g). "Deposit substitutes" shall mean an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for purpose of relending or purchasing of receivables and other obligations. These instruments may include, but need not be limited to, promissory notes, repurchase agreements, certificates of assignment or participation, and similar instruments with recourse as may be authorized by the Central Bank of the Philippines for banks and non-bank financial intermediaries: Provided, however , that instruments denominated to as trust certificates, trust indenture, and the like, but which otherwise assures or guarantees, in one way or another, a rate of interest or return, or any income whatsoever, through indeterminable, in favor of the trustor in respect to cash investments, shall be considered subject hereof: Provided, further , that debt instruments issued for interbank loans, including those between or among quasi-banks shall not be considered as deposit substitute debt instruments." cd SECTION 3 . Subsection (i) of Section 2 is hereby amended to read as follows: "Sec. 2(i). "Yield" shall mean the difference between the amount the lender/investor/loaned/placed and the amount be received upon maturity of the deposit substitute/debt instruments which shall in no case be lower than the interest rate prevailing at the time of the issuance or renewal of the said debt instruments as described in Section 2(g). Yield shall be synonymous with the interest rate of return earned by a debt security held to maturity." cdt SECTION 4 . Effectivity . These supplementary regulations shall take effect beginning May 1, 1981. ALFREDO PIO DE RODA, JR. Acting Minister of Finance Recommended by: RUBEN B. ANCHETA Acting Commissioner