Law Summary
Amendment to Section 30(b) of the National Internal Revenue Code
- Interest paid on indebtedness is deductible, except where indebtedness is for purchasing tax-exempt obligations.
- Interest on deposits paid by authorized banks is deductible only if the corresponding tax has been withheld and paid in accordance with Sections 53 and 54.
Withholding Tax on Interest Income (Section 53 Amendments)
- Banks are required to withhold a 15% tax on interest from bank deposits, excluding interest paid to non-resident aliens and foreign corporations.
- No withholding is required if the depositor’s total interest income from a bank does not exceed ₱350 per year or ₱87.50 per quarter.
- Interest on joint deposit accounts is deemed equally owned for tax purposes.
Treatment of Interest Income for Income Tax Purposes
- Interest income from deposits must still be included in the depositor's gross income when computing income tax liability.
Tax Exemption and Preferential Treatment for Certain Depositors
- Depositors who are tax-exempt or enjoy preferential tax treatment can claim refunds or credits for withheld taxes by submitting proof to the Commissioner of Internal Revenue.
Manner of Withholding and Payment of Tax
- Banks shall withhold the tax without disclosing depositor identities.
- Payment and reporting follow the procedures and conditions set forth in Section 54 of the National Internal Revenue Code.
Effectivity of the Decree
- The withholding tax provisions apply to interest on bank deposits accruing on or after the date of approval (June 3, 1977).