By Jun Ramirez
Thes (CTA) has ruled that investments of foreign governments in the Philippines are tax exempt.
This was stressed by the Second Division of the CTA when it instructed the Bureau of Internal Revenue (BIR) recently to return to the Central Bank of Singapore (CBS) more than P15 million the latter had paid covering interest income on its investments here.
In a 14-page decision, the tax court said that investments of foreign governments in the Philippines such as bank deposits, bonds and other domestic securities are exempted from income tax, hence from withholding tax under Section 32 of the Tax Code.
The bank took the case to the court after the BIR had rejected its tax refund claim covering 20 percent withholding tax on the bank’s P73.3 million interest income from its purchase of fixed rate treasury notes (FXTNs) in 2013.
The BIR said the FXTNs were not owned by CBS officially known as the Central Monetary Authority of Singapore (MAS) but by the State Street Bank and Trust Company and the Northern Trust Company.
The court, however, sided with the MAS after it presented documents showing that the two financial institutions had designated MAS as custodian of their assets and investments in the country.
Tags: Court of Tax Appeals, CTA, foreign government, Foreign gov’t investments in PH tax exempt, investments, manila bulletin