BSP asks banks to prove income tax payments

by Prinz Magtulis, The Philippine Star

Posted at Jul 07 2013 02:35 PM | Updated as of Jul 07 2013 10:35 PM

MANILA - The Bangko Sentral ng Pilipinas (BSP) has ordered financial institutions to prove they have paid correct income taxes to the government, corresponding to the interest they earned from lending to the central bank.

Under Memorandum 2013-031 issued July 1, the central bank wants banks and non-banks performing with quasi-banking functions to “submit proofs of remittance” of taxes paid for interest income from the BSP for the past six years.

The documents to be submitted, the central bank said, must detail dues paid to cover for the interest their parked money earned from the BSP.

“The BSP would like to reconcile its records with those of the banks,” BSP deputy governor Nestor Espenilla Jr. said in a text message when asked for the purpose of the new requirement.

The central bank, among others, has the reverse repurchase (RRP) and special deposit account (SDA) facilities which allow lenders to park their money with the BSP for a particular period while it gains interest.

The windows are meant for the BSP to control liquidity in the system which, if too much, could stoke inflation. At the same time though, banks could earn interest of 5.5 percent from RRPs and two percent from the SDA at present.

According to the National Internal Revenue Code (NIRC), interest earnings from these facilities are charged with percentage tax on gross receipts.

Since SDA and RRP have maximum maturities of one month, bank earnings from these windows should be charged with five percent percentage tax, according to the NIRC.

The BSP, in its memorandum, said banks and non-banks should submit their reports by July 22 for percentage tax payments covering taxable year 2009. They have until Oct. 31 for taxable year 2010.

For 2011, proofs of remittance should be in by year-end, while for last year and this year, the deadlines were set at March 31, 2014 and June 30, 2014, respectively.

The data should be addressed to the BSP’s Financial Accounting Department, the memo stated.

“Upon receipt of the required information, BSP may submit the same to the Bureau of Internal Revenue,” the central bank said.