BIR Ruling [DA-036-02]

March 07, 2002 BIR RULING [DA-036-02] 102 & 116 065-91 Ms. Marcelinda O. Yap Regional Director Bureau of Internal Revenue Revenue Region No. 17 Butuan City M a d a m : This refers to the letter of your predecessor, Regional Director Danilo A. Duncano, dated June 30, 2000 requesting for a ruling as to the date of effectivity of the Value-Added Tax (VAT) imposition on pawnshops. In reply, please be informed that the principal activity of a pawnshop is akin to that of a lending investor's business, which broadly encompasses the business of lending money at interest. (BIR Ruling No. 065-91 dated April 19, 1991) Thus, under Revenue Memorandum Order No. 15-91, pawnshops became subject to the 5% lending investor's tax under then Section 116 of the Tax Code, as amended. However, effective January 1, 1996, lending investors became subject to the value-added tax (VAT) under Section 102(a) of the Tax Code, as amended by Republic Act (R.A.) No. 7716, as further amended by R.A. No. 8241 (Section 108(A), Tax Code of 1997), and as last amended by R.A. 8424. Pawnshops accordingly became subject to VAT effective that date. Central Bank Circular No. 374 includes pawnshops among those considered non-bank financial intermediaries for purposes of supervision by the said Office (BSP) but for tax purposes, pawnshops are considered as lending investors. As such, services rendered by pawnshops are not among those deferred until January 1, 2003 pursuant to R.A. No. 9010. Please be guided accordingly. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group