REVENUE MEMORANDUM CIRCULAR NO. 7-2015 issued on March 6, 2015 reiterates the tax treatment of interest income derived from Long-Term Deposits or Investment Certificates, as described in Revenue Regulations No. 14-2012 and clarified in Revenue Memorandum Circular Nos. 77-2012 and 81-2012.
     The following characteristics/conditions must be present in order for the interest income from Long-Term Deposits or Investment Certificates to be exempted from Income Tax:

1. 1. 1. 1. The depositor or investor is an individual citizen (resident or non-resident) or resident alien or non-resident alien engaged in trade or business in the Philippines;
         2. The Long-Term Deposits or Investment Certificates should be under the name of the individual and not under the name of the corporation or the bank or the trust department/unit of the bank;
         3. The Long-Term Deposits or investments must be in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP);
         4. The Long-Term Deposits or investments must be issued by banks only and not by other entities or individuals;
         5. The Long-Term Deposits or investments must have a maturity period of not less than five (5) years;
         6. The Long-Term Deposits or investments must be in denominations of P 10,000 and other denominations as may be prescribed by the BSP;
         7. The Long-Term Deposits or investments should not be terminated by the original investor before the fifth (5th) year, otherwise they shall be subjected to the graduated rates of 5%, 12% or 20% on interest income earnings;
         8. Except those specifically exempted by law or regulations, any other income such as gains from trading, foreign exchange gain shall not be covered by Income Tax exemption.

     Provided, that for interest income derived by individuals investing in common or individual trust funds or investment management accounts to be exempt from Income Tax, the following additional characteristics/conditions must ALL be present:

1. 1. 1. 1. The investment of the individual investor in the common or individual trust fund or investment management account must be actually held/managed by the bank for the named individual at least five (5) years without interruption. The term “bank” referred to herein are banks duly licensed as such by the BSP;
         2. The underlying investments of the common or individual trust account or investment management accounts must comply with the requirements of Section 22(FF) of the NIRC of 1997, as amended, as well as the requirements mentioned above;
         3. The common or individual trust account or investment management account must hold on to such underlying investment in continuous and uninterrupted period for at least five (5) years.
                 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%
             

     For non-resident alien not engaged in trade or business in the Philippines, interest income received from Long-Term Deposit or investment shall be subject to a FWT at the rate of 25% pursuant to Section 25 (B) of the National Internal Revenue Code (NIRC) of 1997, as amended.
     For non-resident foreign corporation, interest income received from Long-Term Deposit or investment shall be subject to a FWT at the rate of 30% pursuant to Section 28 (B) (1) of the NIRC of 1997, as amended. However, interest income from Long-Term Deposit or investment shall be subject to regular Income Tax at the rate of 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.