5% Gross Receipts Tax on Income Derived from Investing the Excess Funds in Short-Term Market Placements

November 2, 1989 BIR RULING NO. 223-89 120 000-00 223-89 Gentlemen : This refers to your letter dated August 15, 1989 stating that you are a venture capital corporation jointly owned by the Philippine Banking Corporation, National Development Company (NDC) and Strategic Investments Development Corporation (SIDCOR) whose main corporate business involves the providing of financial assistance to small and medium enterprises through loans, equipment financing, equity investment and other similar packages; and that you have been paying the 5% tax as a finance company. You now request a ruling as to whether your income derived from investing your excess funds in short-term money market placement through commercial banks which is already subjected to 20% final withholding tax is still subject to the 5% gross receipts tax under Section 120 of the Tax Code. In reply, please be informed that the 5% gross receipts tax under Section 120 of the Tax Code, as amended by P.D. No. 1739, is collectible on all finance companies doing business in the Philippines from interests, discounts and all other items treated as gross income under the Tax Code. Accordingly, your income derived from investing the excess funds in short-term market placements through commercial banks constitutes income, hence, subject to the 5% gross receipts tax under said Section of the Tax Code. The fact that it has been subjected to the 20% final withholding tax under Section 50(a) of the Tax Code is immaterial. Besides, the withholding tax is imposed under Title II of the Tax Code while the finance tax is provided under Title V thereof. As regards your other question if there has been a change on the provisions of the Tax Code regarding finance companies during the last five (5) years, please be informed in the negative. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner