Philippines Says No Contract Breach in Taxing Bonds Due Tomorrow

Philippine Tax Commissioner Kim Henares said a 2004 Bureau of Internal Revenue ruling “superseded” a 2001 decision that so-called PEACe bonds sold then were subject to regular income tax and not the 20 percent final tax.

“We can issue a tax refund to anyone who had paid income taxes on the PEACe bonds,” Henares said in a phone interview. “There was no breach of contract and we’re not changing rules mid way. A ruling has been issued since 2004 and the bonds were never tax exempt to begin with.”

Rizal Commercial Banking Corp. (RCB) said it had asked the Court of Tax Appeals to review the government decision that 35 billion pesos of PEACe bonds due Oct. 18 will be subject to a 20 percent tax. The bonds weren’t subject to a withholding tax, according to a term sheet distributed to investors when the zero-coupon bonds were sold in 2001.

To contact the editor responsible for this story: Clarissa Batino at cbatino@bloomberg.net

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