Pawnshops Subject to 5% Lending Investor's Tax Based on Their Gross Income

April 19, 1991 BIR RULING NO. 065-91 116 000-00 065-91 Gentlemen : This refers to your letter dated December 19, 1990 requesting a ruling on the business tax liability of a pawnshop effective January 1, 1988. In reply, please be informed that pursuant to Executive Order No. 273 effective January 1, 1988, the fixed tax on business was deleted; thus, beginning said date, pawnshops are no longer subject to the annual fixed tax of P1,000.00 prescribed under then Section 161 (3) (ff) of the Tax Code. While pawnshops then were classified separately from a lending investor which was then subject to fixed tax and percentage tax under then Section 161 (cc) and 175 respectively of the Tax Code, a restudy of P.D. 114 shows that the principal activity of a pawnshops business is akin to lending investors business, an activity broad enough to encompass the business of lending money at interest by any person whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending investor's tax based on their gross income pursuant to Section 116 of the Tax Code, as amended. This revokes VAT Ruling Nos. 022-90 and 67-90 and BIR Ruling No. 06-90. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner