QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 18-2011)
It refers to certificates of time deposits or investments in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments with a maturity period of not less than five (5) years, prescribed by the BSP and issued by banks only to individuals, in denominations of P10,000 and other BSP-prescribed denominations.
Sections 24(B)(1) and 25(A)(2) of the National Internal Revenue Code (NIRC) of 1997, as amended.
Interest income from qualifying long-term deposits or investments evidenced by certificates in forms prescribed by the BSP is exempt from income tax.
A final tax is imposed on the entire income. The depository bank must deduct and withhold the final tax from the proceeds based on the remaining maturity.
If 4 years to less than 5 years: 5%; if 3 years to less than 4 years: 12%; if less than 3 years: 20%.
An individual citizen (resident or non-resident) or resident alien or nonresident alien engaged in trade or business in the Philippines—i.e., not a corporation.
Savings, common or individual trust funds, deposit substitutes, investment management accounts, and other investments evidenced by certificates in forms prescribed by the BSP.
A maturity period of not less than five (5) years.
The deposits/investment certificates must be in denominations of P10,000 and other denominations as prescribed by the BSP. It is relevant because eligibility conditions for the exemption include the denomination requirement.
It is limited to interest income only. The exemption does not cover other income such as gains from trading or foreign exchange gains.
Corporations are excluded. Also, the certificate must be under the name of the individual, not under a corporation or the bank/trust unit.
They are considered void and of no legal effect because they are contrary to law.