ONLY bank deposits and government securities are subject to the provisions of the bank secrecy law, the Bureau of Internal Revenue (BIR) reminded business, banking and financial sectors on Tuesday.
In a statement, the tax bureau cited Section 2 of Republic Act (RA) 1405, which provides that all deposits of whatever nature in banks or banking institutions in the Philippines and investments in government bonds are absolutely confidential in nature. RA 1405 is also known as an “Act Prohibiting Disclosure of or Inquiry into, Deposits with any Banking Institution and Providing Penalty Therefore.”
Under the law, the BIR noted that deposits refer to money or funds placed with a bank that can be withdrawn on the depositor’s order or demand, such as deposit accounts in the form of savings, current and time deposits, while investments in Government Bonds refer to investments in bonds issued by the Government of the Philippines, its political subdivision and its instrumentalities.
“Government bonds are debt securities which are unconditional obligations of the State, and backed by its full taxing power. Government bonds include treasury bills, treasury notes, retail treasury bonds, dollar linked peso notes and other risk free bonds,” it explained.
The bureau added that not covered by the bank secrecy law are investments that are not bank deposits or government securities such as corporate bonds, purchases of shares of stocks, purchases of receivables of business, and purchases of foreign exchange.
BIR further said the rule is interest income paid to bank deposits is subject to a final withholding tax. For those claiming exemption from taxes on interest income on deposits, they should prove that they are entitled to said exemption; otherwise, the said income is subject to the final withholding tax.
In this regard, the tax bureau said that the requirement for the business, banking and financial sectors to withhold and provide Alpha Lists have been in place as early as January 1997 and was implemented by Revenue Regulations (RR) No. 2-98, as amended by RR No. 10-2008.
RR No. 1-2014 issued in December 17, 2013 (published in January 2014) is the latest amendment to RR No. 2-98 which requires taxpayers to list down each person to whom income payment was made. Lumping into one single amount (e.g. “various employees,” “various payees,” etc.) is prohibited and deduction thereof for purposes of taxation will not be allowed.
“There was nothing new that was added in the regulations, we only made it stricter.
Investors have nothing to fear if they are tax compliant,” said Commissioner of Internal Revenue Kim Henares.
“Logic dictates that if you have a lot of money to invest, then you must have earned it and have paid the right taxes on your earning. Rest assured though that information in the hands of the BIR are confidential and cannot be disclosed without the approval of the President of the Philippines, under pain of imprisonment,” she added.