Himan & Associates

October 5, 2008 BIR RULING [DA-(C-086) 274-08] 108; RR 16-2005; DA-320-07; DA-426-07 Himan & Associates 6th Floor, Country Space Building Sen. Gil Puyat Street Salcedo Village, Makati City Attention: Mr. Eric D. Himan Gentlemen : This refers to your letter dated July 3, 2007 requesting, in behalf of your client Lucky Money Lending Co. Inc. (Lucky Money), for a confirmation of your opinion that the applicable tax for Lucky Money shall be the Gross Receipts Tax (GRT). Documents submitted disclosed that Lucky Money is a company registered with the Bangko Sentral ng Pilipinas (BSP); that Lucky Money is classified as a Non-Bank Financial Institution not performing quasi-banking functions; that it is a Lending Investor Company organized in the form of stock corporation at least sixty per centum of the capital stock of which is owned by citizens of the Philippines; that it has a total subscribed capital of P10,000,000.00 and paid-up capital of P2,530,000.00; and that in a letter by Ms. Aida B. Ines, Manager III, Department of Thrift Banks and Non-Bank Financial Institutions, Bangko Sentral ng Pilipinas, it was stated therein that as a non-bank financial intermediary not allowed to engage in quasi-banking functions, Lucky Money cannot accept deposits or placements or borrow from more than 19 lenders. In reply, please be informed that a lending investor is defined under Section 4.108-3 of Revenue Regulations No. 16-2005 as follows: "Lending investor includes all persons other than banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions who make a practice of lending money for themselves or others at interest." EaIcAS In addition, BIR Ruling dated March 31, 1997 provided for the requisites to be considered in determining who are lending investors. The requisites are as follows: 1. One must be engaged in the business of lending money for themselves or others at interest; and 2. The lending of money must be carried on with a view to profit or livelihood. Thus, Lucky Money Lending Co. Inc., being a lending investor, is not subject to the schedular rate of tax imposed upon banks and other non-bank financial intermediaries by Section 121 of the Tax Code of 1997. A lending investor is subject to a tax equivalent to 5% of its gross income under Section 122 of the same Tax Code. (BIR Ruling No. DA-320-07 dated May 31, 2007) Also as a lending investor, you shall be subject to the value-added tax (VAT) under Section 108 of the Tax Code of 1997. (BIR Ruling No. DA-426-07 dated July 27, 2007) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service