Lending Investors Not Subject to Schedular Rates Imposed on Banks

August 26, 1993 BIR RULING NO. 364-93 LENDING INVESTORS NOT SUBJECT TO SCHEDULAR RATES IMPOSED ON BANKS 116; 119;21 (f) 000-00 364-93 Core Lending Services Ancajas Bldg., Guizo Mandaue City Attention: Mr . Miguel C . Retuya Management/Financial Consultant This refers to your letter dated March 1, 1993, which was referred to this Office by the Secretary of Finance for resolution of the issues raised by you. In reply, please be informed that lending investors are not subject to the schedular rates of tax imposed upon banks and other non-bank financial intermediaries by Section 119 of the Tax Code. A lending investor is subject to a tax equivalent to 5% of its gross income under Section 116 of the same Code. cdtech As regards your question whether taxes and licenses paid during the year by a self-employed person or single proprietorship are deductible items, please be informed in the negative. Under Section 29 of the Tax Code, as amended, by Republic Act No. 7496, otherwise known as the Simplified Net Income Taxation Scheme (SNITS) law, in computing taxable income subject to tax of individuals engaged in business or practice of profession under Section 21(f) of the Tax Code, only the direct costs enumerated in letters a to g therein are allowable as deductions. These direct costs are exclusive and no other expenses although connected with trade, business or profession of the taxpayer will be allowed as deduction from gross income. Hence, repairs and maintenance, advertising, publicity, membership dues, etc., are likewise not deductible. It may be stated herein that Revenue Regulations No. 2-93 merely implements Republic Act No. 7496 but it cannot expand the coverage of the deductions allowable under SNITS. cd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue