Tax Liability of the Diners' Club (Philippines) Inc.

September 30, 1959 BIR RULING NO. 517-59 Messrs. Meer, Meer & Meer Attorneys-at-Law Suite 302-306 Singson Bldg. Plaza Moraga, Manila Gentlemen : Reference is made to your letter dated July 24, 1959 stating the following: "The business of our client is of a very recent vintage and deserves some amount of explanation. Our client, after a thorough credit investigation, accepts applications for membership upon payment of a fee of P12.00, whereupon, a credit card is issued to a member. A holder of a credit card enjoys the privilege of purchasing merchandise and services on credit and merely signs the invoices of accredited stores, hotels and restaurants. A statement of account for these purchases or services are then sent to the Diners' Club, and our client purchases the accounts of its members from the accredited stores. In consideration of receiving outright payment for the account receivable, the store allows our client a cash discount ranging from 5% to 10% of the charges paid. In turn, on agreed periods of time, our client receives payment from its members. "On the membership fee received by our client, an opinion has been rendered by your Regional Director, Mr. Teofilo Ora, in-connection with a similar case, a true copy of which is enclosed herewith, which we trust we are entitled to follow, subject to your confirmation. "With reference to the cash discount of 5% to 10% which our client receives upon purchasing the account receivables of its members from the creditor stores, we likewise seek a ruling of your office whether any tax other than income taxes and additional residence taxes are due." In reply thereto, I have the honor to inform you that your client, The Diners' Club (Philippines) Inc., for undertaking the activity mentioned above is not subject to any internal revenue tax on business. It is, however, subject to the income and residence taxes on the P12.00 membership fee and the 5% to 10% discount it secures for the purchase of account receivables due from its members. cdll Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue