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The PEACe Bonds, according to the SC, requires further information for
proper determination of whether these bonds are within the purview of
deposit substitutes. The Court noted that it may seem that the lender is only
CODE-NGO through RCBC. However, the underwriting agreement reveals
that the entire 35billion worth of zero-coupon bonds were sourced directly
from the undisclosed number of investors. These are the same investors to
whom RCBC Capital distributed the PEACe Bonds all at the time of the
origination or issuance. Hence, until there is information as to whether the
PEACe Bonds are found within the coverage of deposit substitutes, the proper
procedure for the BIR is to collect the unpaid final withholding tax directly
from RCBC Capital/ CODE-NGO, or any lender if such be the case.
The court also noted that according to the NIRC, Section 24, interest
income received by individuals from long term deposits or investments with a
holding period of not less than five years is exempt from final tax.