Graduated Annual Fixed Tax

July 10, 1979 BIR RULING NO. 059-79 Graduated annual fixed tax This refers to your letter dated January 25, 1979 requesting opinion as to whether the income to be derived by a finance company in its contemplated trading activity such as the purchase and sale of appliances and other manufactured products which activity is one of the secondary purposes enumerated in the charter of said company, is includible in the gross receipts of the finance company for purpose of the 5% tax imposed by Section 261 of the Tax Code. In reply, I have the honor to inform you that finance companies refer to "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 granting direct loans or by discounting of factoring commercial papers or accounts receivable 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". (Section 261, Tax Code) Trading activity not being one of the activities of a finance company, the gross income derived therefrom is not subject to the 5% tax imposed on financing company under Section 261 of the Tax Code. However, the sales to be derived by the said financing company from the trading activity is subject to the graduated annual fixed tax imposed by Section 192 (2) of the Tax Code of 1977, as amended by P.D. No. 1457.