To: ALL BANKS AND NON-BANK FINANCIAL INSTITUTIONS WITH QUASI-BANKING FUNCTIONS
Subject: Withholding of Percentage Tax – Gross Receipt Tax
Under Revenue Regulations No. 02-98, the Bangko Sentral ng Pilipinas (BSP) is required to deduct and withhold the percentage taxes, GRT due from its payments to all banks and non-bank financial institutions with quasi-banking functions, to quote as follows:
SECTION 5.116. Withholding of Percentage Tax —
Bureaus, offices and instrumentalities of the government, including government-owned or controlled corporations as well as their subsidiaries, provinces, cities and municipalities making any money payment to private individuals, corporations, partnerships and/or associations are required to deduct and withhold the taxes due from the payees on account of such money payments.
(A) Internal revenue taxes required to be withheld. – Percentage taxes on gross money payments, to the following shall be subjected to withholding at the rates herein prescribed:
(5) Banks and non-bank financial intermediaries –
(a) On interest, commissions and discounts paid or given to banks and non-bank financial intermediaries arising out of lending activities as well as financial leasing, on the basis of the remaining maturities of the instrument –
Short term maturity (not exceeding 2 years) – 5%
Medium-term maturity (over 2 year but not exceeding 4 years) – 3%
(i) over 4 years but not exceeding 7 years – 1%
(ii) over 7 years – 0%
(b) On dividends – 0%
(c) On royalties, rentals of property, real or personal, profits from exchange and all other gross income – five percent (5%)
In light of the above, BSP shall withhold the applicable percentage tax, i.e. gross receipts tax, from ALL payments to banks and non-bank financial institutions with quasi-banking functions, such as, but not limited to, interest payments pertaining to the following: Special Deposit Account (SDA) – Regular, Special Deposit Account (SDA) – Trust, Government Securities Sold Under Agreements to Repurchase (RRP) and Reserve Liquidity Account (RDLA) on accrual basis effective 01 August 2014.
The withholding and the subsequent remittance of taxes withheld shall be without prejudice to available remedies to the BSP and the bank or quasi-bank concerned after the final resolution of the issues relating to withholding of the GRT.
For the Monetary Board:
VICENTE S. AQUINO
To download a copy of the Memo, please click on this link: BSP Memorandum No. M-2014-029