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LETTER OF INSTRUCTIONS
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LETTER OF INSTRUCTIONS NO. 192
TO
: The Commissioner of Internal Revenue
WHEREAS, under Presidential Decree No. 131, dated February 19, 1973,
the rate of withholding tax on interest on foreign loans was reduced
from 35% to 15% beginning January 1, 1973;
WHEREAS, before the promulgation of the said Presidential Decree, there
were persons, corporations, and entities who had already incurred
liabilities to the withholding tax at the old rate of 35% on interest
payments made on foreign loans;
WHEREAS, the introduction of the floating rate of exchange in February,
1970, an event which was unforeseen when many of such loans were either
negotiated and contracted, necessitated an increase in the peso
requirements to service these obligations and, consequently, increased
also the liability to the withholding tax on the interest
thereon;
WHEREAS, there have been serious difficulties in the collection of such
tax liabilities because such persons or entities have been in financial
distress to the extent that in some cases, their guarantors mostly
government financing institutions had to advance funds for the
servicing thereof; and
WHEREAS, to enforce collection of such tax liabilities thru summary
remedies may seriously impair the financial condition or jeopardize the
business operations of the persons, corporations or entities concerned
to the extent of forcing them to liquidate or abandon their businesses,
an event which will adversely affect the economic growth and
development of the country.
In view of the foregoing, I, FERDINAND E. MARCOS, President of the
Philippines, hereby direct you to cause the early settlement of such
liabilities on withholding tax on interest paid on foreign loans by
accepting payments therefor at the reduced rate of 15% under the
following terms and conditions:
a.
The person or entity shall have been ascertained
as incapable of paying the liability of the withholding tax of 35%;
and/or; if forced to pay such liability, a serious dislocation of the
business operations may ensue;
b. The amount
payable under this instruction shall be
paid in full within fifteen (15) days from date of notification except
when the amount payable is more than P200,000.00 in which case it can
be paid by installments in equal amounts but in no case shall the
period of payment exceed one year from the date of payment of the first
installment.
2. The
proceedings for the collection of tax accounts
on withholding tax under Section s 53 and 54 of the National Internal
Revenue Code, whether pending in the Bureau of Internal Revenue or are
in the courts are hereby suspended for a period of six months from the
date of this Letter of Instructions in order to afford the taxpayers
involved the opportunity to avail of the concession granted above. Such
suspension, however, stops the running of the period of prescription.
3. Suspension
of laws, decrees, etc. — In the
implementation of this Letter of Instructions and in order that the
objectives thereof may be accomplished expeditiously, all provisions of
the various laws, decrees, executive orders, administrative orders and
letters of instructions which may be inconsistent herewith are hereby
suspended for the duration of the period allowed herein.
4.
Implementing circulars. — To give effect to these
instructions, appropriate rules and circulars shall be issued by the
Commissioner of Internal Revenue.
DONE in the City of Manila, this 7th day of June, in the year of Our Lord, nineteen hundred and seventy-four.
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