BIZ BUZZ: DST on dollar deposits?
After the presidential veto of thorny provisions of the Capital Markets Efficiency Promotion Act, there’s still an unresolved issue awaiting government resolution after all.
While President Marcos invoked his line-item veto power to maintain the exemption of foreign investors’ foreign currency deposit unit (FCDUs) income from the 20-percent withholding tax, there’s confusion among banks whether FCDU time deposit is subject to documentary stamp tax (DST).
We heard that the bankers who are part of the open market and tax committees of the Bankers Association of the Philippines are divided on this issue.
Some banks argue that the tax exemption kept by Mr. Marcos covers even the DST on FCDU time deposit, while others think that the instrument is taxable and exempt only from the withholding tax.
“It seems that the law is silent, so it’s subject to one’s own interpretation,” a banking source told Biz Buzz.
The provisions are too vague that even the bankers could not agree among themselves.
It’s something that the Bureau of Internal Revenue will have to clarify as soon as possible.
We’re not talking about a negligible amount here. FCDU deposit liabilities of the banking system stood at $55.46 billion as of end-December, 97.6 percent of which are owned by residents (and deemed as additional buffer to the country’s gross international reserves.)
