The expanded foreign currency deposit system (FCDU) is a financial mechanism established in the Philippines to promote the stability of the Philippine peso and facilitate foreign exchange transactions. It allows individuals and corporations, including resident and non-resident aliens, to hold and transact in foreign currencies within the country.
Key Facts
- Purpose: The expanded FCDU system was established to promote the stability of the Philippine peso and facilitate foreign exchange transactions.
- Eligible Depositors: The system is open to both individuals and corporations, including resident and non-resident aliens.
- Types of Deposits: The expanded FCDU system allows for various types of deposits, including savings accounts, time deposits, and demand deposits, denominated in foreign currencies.
- Taxation: Interest income on residents’ deposits under the expanded FCDU accounts is subject to a tax rate of 15%. However, interest income on FCDU accounts of non-residents is exempt from tax.
- Withdrawals and Transfers: Depositors can freely withdraw and transfer funds from their FCDU accounts, subject to any applicable foreign exchange regulations.
Eligible Depositors
The expanded FCDU system is open to both individuals and corporations, including resident and non-resident aliens. To open an FCDU account, depositors must approach an authorized agent bank, which will facilitate the account opening process and provide ongoing account management services.
Types of Deposits
The expanded FCDU system allows for various types of deposits, including savings accounts, time deposits, and demand deposits, denominated in foreign currencies. These deposits offer competitive interest rates and flexible terms, making them attractive to both local and foreign investors.
Taxation
Interest income on residents’ deposits under the expanded FCDU accounts is subject to a tax rate of 15%. However, interest income on FCDU accounts of non-residents is exempt from tax, making it a beneficial investment option for foreign individuals and corporations.
Withdrawals and Transfers
Depositors can freely withdraw and transfer funds from their FCDU accounts, subject to any applicable foreign exchange regulations. This flexibility allows depositors to easily access their funds and manage their foreign currency investments.
Conclusion
The expanded FCDU system plays a crucial role in the Philippine financial system by promoting the stability of the Philippine peso, facilitating foreign exchange transactions, and attracting foreign investments. It provides a secure and convenient platform for individuals and corporations to hold and transact in foreign currencies, contributing to the overall economic growth and development of the country.
Sources
- https://taxsummaries.pwc.com/philippines/individual/income-determination
- https://kpmg.com/ph/en/home/insights/2021/04/special-intax-april-2021-issue1-volume2.html
- https://taxnews.ey.com/news/2021-0679-philippines-enacts-law-reducing-corporate-income-tax-rates-and-rationalizing-fiscal-incentives
FAQs
What is the purpose of the expanded FCDU system?
The expanded FCDU system aims to promote the stability of the Philippine peso and facilitate foreign exchange transactions, thereby contributing to the overall economic growth and development of the country.
Who is eligible to open an FCDU account?
The expanded FCDU system is open to both individuals and corporations, including resident and non-resident aliens.
What types of deposits are allowed under the expanded FCDU system?
The expanded FCDU system allows for various types of deposits, including savings accounts, time deposits, and demand deposits, denominated in foreign currencies.
How is interest income on FCDU deposits taxed?
Interest income on residents’ deposits under the expanded FCDU accounts is subject to a tax rate of 15%. However, interest income on FCDU accounts of non-residents is exempt from tax.
Can depositors freely withdraw and transfer funds from their FCDU accounts?
Yes, depositors can freely withdraw and transfer funds from their FCDU accounts, subject to any applicable foreign exchange regulations.
What are the benefits of holding an FCDU account for non-resident aliens?
Non-resident aliens benefit from tax exemption on interest income earned from their FCDU accounts, making it an attractive investment option.
How does the expanded FCDU system contribute to the stability of the Philippine peso?
By attracting foreign investments and facilitating foreign exchange transactions, the expanded FCDU system helps to stabilize the Philippine peso and promote economic growth.
What role do authorized agent banks play in the expanded FCDU system?
Authorized agent banks facilitate the opening and management of FCDU accounts, providing depositors with access to foreign currency banking services.