Attention: Individual UCPB LTNCD Holders

Transcription

1 Customer Service Advisory January 2013 Attention: Individual UCPB LTNCD Holders Please be informed that pursuant to Revenue Regulations No (RR No ) issued by the Bureau of Internal Revenue (BIR) dated November 07, 2012 (Proper Tax Treatment of Interest Income Earnings on Financial Instruments and Other Related Transactions), all transfers or negotiation of UCPB LTNCDs by individual holders before the 5 th year from their respective Issue Dates shall be subject to final withholding tax (FWT) on the entire interest income from the UCPB LTNCDs. Accordingly, under Section 3 of BIR s RR No , in the event of a transfer or negotiation of any of the UCPB LTNCDs by individual Holders (Philippine Citizens, Resident Aliens and Non- Resident Aliens engaged in trade or business in the Philippines) prior to its maturity date, UCPB is required to deduct and withhold the amount of the FWT from the succeeding payments for the UCPB LTNCDs based on the following graduated rates and the remaining maturity period: Remaining Maturity Period Rate Four (4) years to less than five (5) years 5% Three (3) years to less than four (4) years 12% Less than three (3) years 20% Under the Terms and Conditions of the UCPB LTNCDs, any final withholding tax on interest earned on the UCPB LTNCDs shall remain for the account of the Holder. INVESTORS, HOWEVER, ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES OF THEIR OWNERSHIP AND DISPOSITION OF UCPB LTNCDs. Thank you very much. *A copy of the BIR Regulation is available upon request.

2 January 7, 2013 TO INDIVIDUAL HOLDERS (NAMELY, PHILIPPINE CITIZENS, RESIDENT ALIENS, AND NON-RESIDENT ALIENS ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES) OF THE FOLLOWING UCPB FIXED-RATE LONG-TERM NEGOTIABLE CERTIFICATES OF TIME DEPOSIT ( UCPB CDs ): 1) UCPB Series 1 CDs Due 25 February ) UCPB Series 2 CDs Due 19 November ) UCPB Series 3 CDs Due 21 August 2017 Please be informed that pursuant to Revenue Regulations No (RR No ) 1 issued by the Bureau of Internal Revenue (BIR) dated November 07, 2012 (Proper Tax Treatment of Interest Income Earnings on Financial Instruments and Other Related Transactions), all transfers or negotiation of UCPB CDs by individual holders before the 5 th year from their respective Issue Dates shall be subject to final withholding tax (FWT) on the entire interest income from the UCPB CDs. For your information, we provide below the relevant portion of RR No : Section 3. Tax Treatment of Interest Income Derived From Long-Term Deposits or Investment Certificates. Long Term Deposit or Investment Certificate, as defined in Section 22(FF) of the NIRC of 1997, as amended, refers to certificate of time deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments with a maturity period of not less than five (5) years, the form of which shall be prescribed by the Bangko Sentral ng Pilipinas (BSP) and issued by banks only (not by non-bank financial intermediaries and finance companies) to individuals in denominations of Ten thousand pesos (P10,000) and other denominations as may be prescribed by the BSP. Consistent with the foregoing definition, the tax treatment of interest income derived from Long-Term Deposits or Investment Certificates is as follows: xxx xxx xxx 3. Interest income from long-term deposit or investment that is pre-terminated by the depositor or investor before the fifth (5 th ) year shall be subject to the following graduated rates of Final Withholding Tax (FWT) on the entire income and shall be deducted and withheld by the depository bank from the proceeds of the long-term deposit or investment certificate based on the remaining maturity thereof as follows: Four (4) years to less than five (5) years -- 5%; Three (3) years to less than four (4) years -- 12%; and Less than three (3) years -- 20% Example No. 1 An instrument with a maturity period of 10 years was held by Mr. X (a resident citizen) for 2 years and was transferred to Mr. Y (a resident alien), who, in turn, held it for 8 years. The FWT due are as follows: Mr. X 2 years 20% FWT Mr. Y 8 years Exempt 1 Effective after fifteen (15) days following its complete publication on November 8, 2012 in Manila Bulletin.

3 Example No. 2 An instrument with maturity period of 10 years was held by Mr. X (a nonresident citizen) for 3 years and transferred it to Mr. Y (a resident alien). Mr. Y held it for 2 years before subsequently transferring it to Mr. Z (a resident citizen), who held it until the day of maturity or for 5 years. The FWT due are as follows: Mr. X 3 years 12% FWT Mr. Y 2 years 20% FWT Mr. Z 5 years Exempt Example No. 3 An instrument with maturity period of 10 years held by Mr. X (a nonresident alien engaged in trade or business in the Philippines) for 3 years and transferred it to Mr. Y (a resident citizen). Mr. Y held it for 2 years before subsequently transferring it to Mr. Z (a resident alien), who pre-terminated it after 4 years. The FWT due are as follows: Mr. X 3 years 12% FWT Mr. Y 2 years 20% FWT Mr. Z 4 years 5% FWT 4. Interest income from long-term deposit or investment shall be subject to a Final Withholding Tax (FWT) at the rate of twenty five percent (25%) if received by a nonresident alien not engaged in trade or business in the Philippines pursuant to Section 25(B) of the NIRC of 1997, as amended; 5. Interest income from long-term deposit or investment shall be subject to a Final Withholding Tax (FWT) at the rate of thirty percent (30%) if received by a nonresident foreign corporation pursuant to Section 28(B)(1) of the NIRC of 1997, as amended. 6. Interest income from long-term deposit or investment shall be subject to regular income tax at the rate of thirty percent (30%) if received by a domestic corporation and resident foreign corporation pursuant to Sections 27(A) and 28(A)(1) of the NIRC of 1997, as amended. xxx xxx xxx Accordingly, under the BIR s RR No , in the event of a transfer or negotiation of any of the UCPB CDs by the above-described individual CD Holders prior to its maturity date, UCPB is required to deduct and withhold the amount of the FWT from the succeeding payments for the UCPB CD based on the above-mentioned graduated rates and the remaining maturity period of the UCPB CD. Further, the interest from the UCPB CDs held by a domestic corporation and resident foreign corporation shall be subject to 30% regular income tax. The tax on interest income from the UCPB CDs received by other types of CD Holders remains the same. Under the Terms and Conditions of the UCPB CDs, any final withholding tax on interest earned on the UCPB CDs shall remain for the account of the CD Holder. INVESTORS, HOWEVER, ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES OF THEIR OWNERSHIP AND DISPOSITION OF UCPB CDs.

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