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November 9, 1977 REVENUE REGULATIONS NO. 14-77 SUBJECT : Amending Revenue Regulations No.

10-76 TO : All Internal Revenue Officers and others Concerned Pursuant to Section 338 of the National Internal Revenue Code as amended, the following regulations are hereby promulgated to amend certain sections of Revenue Regulations No. 10-76. SECTION 1. Section 2(h) is hereby amended to read as follows: "SEC. 2(h). Gross onshore income shall mean gross interest income arising from foreign currency loans and advances to and/or investments with residents made by offshore banking units or expanded foreign currency deposit units. In the case of foreign currency loan transactions, such gross interest income shall refer only to the stipulated interest and shall not include any and all fees, commissions and other charges which are integral parts of the income from the above transactions." SECTION 2. Section 3(b) is hereby amended to read as follows: "SEC. 3(b). In the case of gross onshore income as defined in Section 2(h) above, the tax shall be ten percent (10%) thereof and shall be a final tax. Any and all fees, commissions and other charges which are integral parts of the charges imposed on foreign currency loan transactions are exempt from the tax herein imposed." SECTION 3. Section 5(b) is hereby amended to read as follows: "SEC. 5(b). For onshore income — In the case of onshore income realized by an offshore banking unit or by an expanded Foreign Currency Deposit Unit, the income need not be included in the quarterly income tax return to be filed as required above as the payor-borrower under Section 53, in relation to Section 54, of the National Internal Revenue Code, is constituted as the withholding agent charged with the obligation of deducting, withholding and remitting to the Commissioner of Internal Revenue the income tax due thereon within the period prescribed by law with the appropriate return in accordance with existing revenue and Central Bank regulations. Regardless, therefore, of whether the accounting method of an OBU-creditor in cash or accrual basis, the withholding tax will be withheld and remitted only after the due date of payment of the interest incurred by an onshore borrower. SECTION 4. 1, 1977. Effectivity. — This regulation shall apply to income received beginning with taxable year starting after January

CESAR VIRATA Secretary of Finance Recommended by: CONRADO P. DIAZ Acting Commissioner of Internal Revenue TAN: D2567-D1025-A-2