5% Percentage Tax Imposed on Interest Income Charge on Loans as a Lending Investor

September 15, 1988 BIR RULING NO. 450-88 103 (j) 113-00 000-00 450-88 Gentlemen : This refers to your letter June 28, 1988 stating that on May 20, 1988 you have amended your Articles of Incorporation not only changing your name from Business Assistance Group, Inc. to Business Assistance Credit Corporation, but also modifying your business purpose to include the activity of a lending investor. Based on the foregoing facts, you now request for a ruling on the applicability of VAT on the interest income you charge on loans. In reply, please be informed that the interest income you charge on loans as a lending investor is subject to the 5% percentage tax pursuant to Section 116 of the Tax Code, as amended by Executive Order No. 273, but exempt from the value-added tax of 10% in accordance with Section 103(j) of the same Code. However, your gross receipts from other service activities shall be subject to the VAT of 10% under Section 102 also of the same Code. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner