Privilege and Percentage Taxes of a Lending Investor

September 15, 1988 BIR RULING NO. 452-88 175-88 81-87 452-88 S i r : This refers to your letter dated September 2, 1988 stating that you are a stockholder of B. Cu Unjieng & Sons, Inc.; and that for the taxable year 1985, you lent to said company the amount of P127,000.00 at 1/2% interest per annum. You now request for a ruling as to whether for the said transaction, you are subject to both privilege and percentage taxes as a lending investor. In reply, please be informed that pursuant to then Section 157(u) of the Tax Code, a lending investor is one who makes "a practice of lending money for themselves or others at interest." A one-time transaction in 1985 which consists of the lending by you of P127,000.00 to your own company does not, therefore, constitute you as a lending investor. Accordingly, for the aforesaid transactions, you are not subject to the privilege and percentage taxes as a lending investor under then Sections 161(3)(dd) and 175 of the Tax Code. However, you are subject to income tax on the interest income derived from such loan pursuant to Section 21(a) of the same Code. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner