BIR Ruling No. 290-2016

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OFINTERNAL REVENUE

c

Quezon City 2004

Person to ContactChief,Law Division

R.A.9520:000-00 RMC 12-10 #290-2016 Tel. Nos. 926-55-36/ 927-09-63

Date: June 27, 2016

Bulan, Sorsogon PERPETUAL MEDICAL CLINIC

Attention: DR. EDGARDO C. MONTEMAYOR, MD

Gentlemen:

business with your cooperative bank particularly on Deposits shall be subjected to a 2013 and February 21. 2013 duly indorsed by Presidential Action Center requesting for an official opinion on whether or not the individual/public depositors transacting 20% withholding Tax. This refers to the consolidated letters dated September 30, 2012, October 21.

In reply, Section 24 (B) of the Tax Code, as amended, provides that a twenty percent (20%) final tax shall be imposed on amount of interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, thus:

"SECTION 24.Income Tax Rates.

XXX XXX XXX

(B) Rate of Tax on Certain Passive Income:

of twenty percent (20%) is hereby imposed upon the amount of interest Interests, Royalties, Prizes, and Other Winnings. --- A final tax at the rate from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements:

XXX XXX XXX *

However, in Dumaguete Cathedral Credit Cooperative vs. CIR', the Supreme Court ruled that cooperatives are not required to withhold taxes on interest from savings and time deposits of their members. Revenue Memorandum No. 047-11 dated October 5,2011

Moreover, Section 11 of JOINT RULES AND REGULATIONS

IMPLEMENTING ARTICLES 60,61 AND 144 OF REPUBLIC ACT NO.9520

OTHERWISE KNOWN AS THE "PHILIPPINE COOPERATIVE CODE OF 2008

IN RELATION TO RA NO. 8424 OR THE NATIONAL INTERNAL REVENUE

CODE,AS AMENDED as circularized by Revenue Memorandum Circular No.012-

10, provides that:

042403 1 G.R. No. 182722, January 22, 2010

290-2016 6-27-2016

PERPETUAL MEDICAL CLINIC Page 2of2

Cooperatives.-All members of cooperatives shall be liable to pay all the "SECTION H. Taxability of Members/Share Holders of

necessary internal revenue taxes under the NIRC, as amended,except for the following:

member's deposits or fixed deposits (otherwise known as share capital) with cooperatives. and documentary tax on transactions of members with the cooperative; and a Any tax and fee, including but not limited to final tax on

b XXX XXX xxx " (emphasis supplied)

member's deposits or fixed deposits, thus deposits of non-members which are not The above-quoted provision and jurisprudence specifically excepted only

mentioned therefore are deemed subject to the 20% final tax.

strictly construed against the taxpayer. Exemptions are never presumed and the doubt2. In the case of Mactan Cebu International Airport Authority v. Marcos3. the Supreme Court held: burden is upon the taxpayer to establish his right to exemption beyond reasonable It should be remembered that laws and statutes granting tax exemptions are

government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law "Accordingly, tax statutes must be construed strictly against the

frowns against exemptions from taxation and statutes granting the

payments must be clearly shown and based on language in the law too liberally in favor of the taxing authority. A claim of exemption from tax exemptions are thus construed strictissimi juris against the taxpayer and

plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. "

tax on interest on deposits. In view of the foregoing, only the member's deposits are exempt from final

Very truly yours.

KIM S.JACINTO-HENARES Commissioner of Internal Revenue

K-1-JRC 042403

JUN 2 7 2016

2 Dimaampao, Japar B., Tax Principles and Remedies, Second Edition (2005)

3 G.R. No.120082,11 September 1996,261 SCRA 667