RA 9010 Applicable Only on Services Rendered by Banks Starting January 1, 2003

September 13, 2004 BIR RULING NO. 014-04 R.A. 9010; RR 12-2003 000-00 Acis D. Rollorata, CPA 3182-B Mariano St., Sta. Mesa, City of Manila S i r : This refers to your letter dated November 18, 2003 requesting on behalf of your client, Concepts and Systems Development, Inc. , for a ruling on the applicability of Revenue Regulations (RR) No. 12-2003, dated January 2, 2003 which took effect on January 1, 2003 on transactions occurring during the year 2002. It is represented that Concepts and Systems Development, Inc. ("CSDI" for brevity) has a standing loan with Landbank of the Philippines wherein the interest therein is payable on a quarterly basis; that last January 13, 2003, CSDI paid the interest due for the last calendar quarter of the year 2002; that on the basis of RR No. 12-2003, Landbank is collecting VAT for the aforementioned interests and penalties from CSDI; that CSDI maintains and insists that it is not liable to pay for VAT on interests and penalties incurred and spent during the year 2002 on the following grounds: (1) that RR No. 12-2003 took effect only on Jan. 1, 2003; (2) that CSDI is adopting a calendar year accounting period; (3) that CSDI is on accrual basis accounting method; (4) that on Dec. 31, 2002, CSDI closed all its Books of Accounts for the taxable year 2002 without recognizing Tax Input for VAT on interests spent and penalties incurred during the year 2002; and (5) that CSDI believes that its obligation to pay VAT on interests and penalties arises only when the same are incurred after January 1, 2003. TaDAIS In reply, please be informed that Section 1 of Republic Act (RA) No. 9010 provides, to wit: "SEC. 1. Section 5 of Republic Act No. 8424, as amended by Republic Act No. 8761, is hereby amended to read as follows: 'SEC. 5. Transitory Provisions . Effectivity of the Imposition of VAT on Certain Services . The imposition of the value-added tax on the following services shall take effect on January 1, 2003 . xxx xxx xxx; (b) Services rendered by banks, nonbank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions;' xxx xxx xxx". (Emphasis supplied) As a general rule, laws shall have no retroactive effect, unless the contrary is provided. [ Art. 4, New Civil Code ] The aforequoted provision of RA 9010 clearly shows that it provides for its own retroactivity, thus, as expressly stated, its retroactive effect shall be reckoned on January 1, 2003. Thus, this Office is of the opinion that RA 9010 should be applicable only on those services rendered by banks starting January 1, 2003. ISCHET 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, (SGD.) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue