VAT Ruling No. 022-90

January 23, 1990 VAT RULING NO. 022-90 R.B. Ancheta & Associates Suite 702, DCG Building 167 Legazpi St.,Legaspi Village Makati, Metro Manila Attention: Mr . Ruben B . Ancheta S i r s : This has reference to your letter dated November 21, 1989 requesting for confirmation of your advice to the members of your client, the Chamber of Pawnbrokers of the Philippines Inc., that the transactions of pawnbrokers or pawnshop owners are not covered by the value-added tax law. It is represented that pawnshops whose operations are supervised and regulated by the Central Bank (in accordance with the Pawnshops Regulation Act) are engaged in the business of lending money on personal property delivered as security for loans and that they perform the following transactions which are incidental to pawn brokerage: (a) their acquisition of pawned articles through forfeiture after an auction sale. (b) their sale or disposition of such forfeited articles. In reply, please be informed that pursuant to Articles 2094 and 2085 of the Civil Code, the operation of a pawnshop partakes the nature of a contract of pledge, thus no service is rendered by such business to its clients. Such being the case, a pawnshop is not subject to value-added tax because the activity does not fall within those performed by persons liable to VAT based on Section 99 of the Tax Code, as amended by Executive Order No. 273. Moreover, the abovementioned transactions which are incidental to pawn brokerage are not also covered by VAT. LLphil Very truly yours, JOSE U. ONG Commissioner of Internal Revenue