Law Summary
Creditable Withholding Tax (CWT) on Interest Income from Loans to Top Twenty Thousand Corporations
- Interest income received by banks from payors belonging to the Top Twenty Thousand Corporations on individual loans that are not securitized, assigned, or participated out is subject to a 2% Creditable Withholding Tax.
- This 2% CWT is applicable strictly to interest income arising directly from these individual loans.
Creditable Withholding Tax (CWT) on Interest Income Paid by Top Twenty Thousand Banks
- Interest income paid by banks designated as part of the Top Twenty Thousand Corporations, arising strictly from loans made to such banks and which are not securitized or participated out, is subject to a 2% CWT.
Applicability of Final Withholding Tax (FWT) and Creditable Withholding Tax (CWT) on Interest from Debt Securities
- Interest income arising from or paid on debt securities is covered by a 20% Final Withholding Tax and Creditable Withholding Tax as imposed under the Tax Code and existing regulations.
- The specific sections referenced cover distinctions between interest income on loans and on debt securities for taxation purposes.
Legal References and Authority
- Section 57[8] and Sections 24[B][1], 25[A][2], 27[D][1], and 28[A][7][a] of the Tax Code, as amended.
- Revenue Regulations No. 2-98, sections 2.57.1[M], 2.57.2[M], and 2.57.2[Y].
Revocation and Modification of Inconsistent Issuances
- All previous issuances and rulings inconsistent with this Circular are revoked or modified accordingly.
Implementation and Enforcement
- Revenue officers and employees are instructed to widely publicize this Circular.
- The Circular takes immediate effect upon issuance.
- Signed by the Commissioner of Internal Revenue, Kim S. Jacinto-Henares.