Lending Investors Not Considered as Non-bank Financial Intermediaries

September 15, 2000 BIR RULING NO. 044-00 RR7-95 000-00 SC Lending Corporation Tacurong, Sultan Kudarat Attention: Mr. Jose H. Siycha General Manager Gentlemen : This refers to your letter dated October 1, 1998 requesting for a ruling on the following issues: 1) whether or not a lending investor is considered a non-bank financial intermediary; and 2) if so, whether the imposition of VAT has been deferred until December 31, 1999 pursuant to Section 17 of RMC No. 1-98. It is represented that SC Lending Corporation is a registered domestic corporation and authorized by Bangko Sentral ng Pilipinas to operate as a lending investor; that previously, it was paying percentage taxes; and that with the enactment of the Tax Reform Act of 1997, your company has to pay VAT under Section 108 of the Tax Code of 1997. In reply, please be informed that Section 4.102-1(e) of Revenue Regulations No. 7-95, as amended provides, viz: SEC. 4.102-1. Value-Added Tax on the sale of services and use or lease of properties. . . . (e) Dealers in securities and lending investors shall be subject to VAT on the basis of the gross income they derive, respectively, from their sale or exchange of securities or their lending activities. xxx xxx xxx "Lending investor" include 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 other at interest." From the above-quoted provision it can be concluded by analogy that a lending investor is not the same nor can it be considered as a non-bank financial intermediary. Accordingly, the imposition of VAT with respect to lending investors is not among those subject to deferment as provided for under Republic Act (R.A.) No. 7716 as amended by R.A. No. 8424, and as last amended by R.A. No. 8761. DaCTcA Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue