Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 16-2009)
Deposit substitutes refer to an alternative form of obtaining funds from the public (involving 20 or more individual or corporate lenders at any one time) other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for purposes such as relending, purchasing receivables and other obligations, or financing their own needs or those of their agents or dealers.
Section 22 (Y) of the National Internal Revenue Code of 1997, as amended, is referenced in clarifying the instruments that qualify as deposit substitutes.
Instruments that may be considered deposit substitutes include bankers' acceptances, promissory notes, repurchase agreements (including reverse repurchase agreements between BSP and authorized agent banks), certificates of assignment or participation, and similar instruments with recourse.
No, interbank call loans with maturity of not more than five days to cover deficiency in reserves against deposit liabilities, including those between or among banks and quasi-banks, are not considered deposit substitutes debt instruments.
The number twenty (20) indicates the minimum count of individual or corporate lenders at any one time for funds obtained that would classify the instrument as a deposit substitute.
The Circular was adopted on February 9, 2009.
The purpose is to regulate alternative forms of obtaining funds from the public distinct from traditional deposits, ensuring proper compliance and tax regulation regarding issued debt instruments.
Yes, debt instruments used for financing the borrower's own needs or the needs of their agents or dealers are included as deposit substitutes.
All internal revenue officers are enjoined to give the Circular as wide publicity as possible to ensure awareness and compliance.