Cir v. Solidbank
Cir v. Solidbank
Cir v. Solidbank
Under the Tax Code, the earnings of banks from passive income are subject to a
twenty percent final withholding tax (20% FWT). This tax is withheld at source and is
thus not actually and physically received by the banks, because it is paid directly to
the government by the entities from which the banks derived the income. Apart from
the 20% FWT, banks are also subject to a five percent gross receipts tax (5% GRT)
which is imposed by the Tax Code on their gross receipts, including the passive
income.
The fact is that if there were no withholding tax system in place in this country, this
20 percent portion of the passive income of banks would actually be paid to the banks
and then remitted by them to the government in payment of their income tax. The
institution of the withholding tax system does not alter the fact that the 20 percent
portion of their passive income constitutes part of their actual earnings, except that it
is paid directly to the government on their behalf in satisfaction of the 20 percent final
income tax due on their passive incomes.