BIR Ruling [DA-171-01]

September 20, 2001 BIR RULING [DA-171-01] Atty. David J. Alarcon Revenue District Officer Revenue District Office No. 34 Paco-Pandacan-Sta. Ana-San Andres Manila S i r : This refers to your fax letter dated May 24, 2001 requesting for a ruling on whether owners of pawnshops are now subject to VAT beginning January 1, 1996. In reply, please be informed as follows: The business of pawnshop, i.e., lending money at interest, is akin to a lending investor's business. 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 RA. No. 8241 (Section 108(A), Tax Code of 1997). Pawnshops accordingly became subject to VAT effective that date. Central Bank Circular No. 374 include 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, 2001 pursuant to R.A. No. 8761. Please be guided accordingly. Very truly yours, (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service