Taxability of Lending Investor and Financing Company

August 27, 1971 BIR RULING NO. 017-71 Lending investor and financing company, taxability of . Under Section 194(u) of the Tax Code, lending investor includes all persons who make a practice of lending money for themselves or others at interest, while Section 249-A of the Tax Code, as amended, defines finance companies as corporations or partnerships other than a bank or insurance company, primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial or agricultural enterprises whether by direct loan or by discounting or factoring commercial papers or accounts receivables for profit, buying and selling contracts, leases, chattel mortgages and other evidences of indebtedness arising out of one or more of the steps in the distribution and sale of commodities. And under Section 3(a) of Republic Act No. 5980, otherwise known as the Financing Company Act, "financing companies" are corporations, or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commissioner and the Cooperative Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages or other evidences of indebtedness, by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property. A financing company is registered, acts and operates in accordance with the provisions of Republic Act No 5980, while a lending investor can act and operates as such lending investor upon payment of the required privilege tax on such business. From the foregoing it is clear that a lending investor cannot be treated or classified as a financing company for internal revenue tax purposes or vice versa. cdtai