BIR Ruling [DA-140-04]

March 26, 2004 BIR RULING [DA-140-04] Section 109; RR No. 12-2003 ECCP-002-2002; ECCP 09-2000 Office of the Secretary of Justice Employees Multi Purpose Coop . Department of Justice, Padre Faura, Manila Attention: Ms. Ma. Elisa B. Germar Chairperson Gentlemen : This refers to your letter dated May 22, 2003 requesting exemption from the Value Added Tax (VAT) on services of banks, non-bank financial intermediaries and finance companies, beginning January 1, 2003 pursuant to Section 1 of Republic Act No. 9010 as implemented under BIR Revenue Regulations No. 12-2003 dated January 2, 2003. It appears that in BIR Ruling No. ECCP-009-2000 dated February 11, 2000, you were granted a tax exemption by the then Deputy Commissioner Sixto S. Esquivas IV; and that Land Bank of the Philippines, your depository and lending bank, does not honor your present exemptions and requested you to secure another certificate of exemption for the above-mentioned VAT imposition from this Office. In reply, please be informed that Section 2 (2.3) of Revenue Regulations No. 12-2003 provides that: "2.3 Non-bank Financial Intermediaries shall refer to persons or entities whose principal functions include lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them or otherwise coursed through them, either for their own account or for the account of others. This likewise includes all other entities regularly engaged in the lending of funds or purchasing of receivables or other obligations with funds obtained from the public through the issuance, endorsement or acceptance of debt instruments of any kind for their own account, or through the issuance of certificates of assignment or similar instruments with recourse, trust certificates, or of repurchase agreements, whether any of these means of obtaining funds from the public is done on a regular basis or only occasionally." Based on the aforementioned revenue regulations, this Office is of the opinion that a cooperative shall be considered as a non-bank financial intermediary only if it is engaged in lending activities with both members and non-members. xxx xxx xxx "If an extension is granted, the Commissioner may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the extension." xxx xxx xxx Accordingly, in view of the aforesaid justifiable reasons, your request for extension of 2 years from February 27, 2004 to February 27, 2006, within which to pay the estate tax due thereon is hereby granted, provided that the executor, or administrator or beneficiaries shall furnish a bond in such amount not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the extension. It shall be understood, however, that the estate shall be liable to the corresponding interest that have accrued thereon up to the time of payment of the estate tax due on the transmission by the said estate of the properties in favor of the heirs pursuant to Section 249 of the Tax Code of 1997. ( BIR Ruling No. DA-285-98 dated June 29, 1998 ) IHTaCE Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group