VAT Ruling No. 067-90

March 9, 1990 VAT RULING NO. 067-90 99-022-90-067-90 Ancon Pawnshop 26 Gov. Pack Road Baguio City Attention: Mr . Arturo P . Rimpos Accountant S i r s : This refers to your letter dated July 17, 1989 representing that your firm is a sole proprietorship enterprise primarily engaged in the ordinary lending of money using personal property as collateral; and that the term of the loan is one month with a three-month grace period subject to renewal, the interest rate of which is being regulated by the Central Bank; and that you derive income generally from interests, discounts and service charges arising from lending activities. Based on the foregoing, you now seek clarification of whether your business is subject to the value-added tax or to the percentage tax under Sec. 119 of the Tax Code, as amended. 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 its activity does not fall within those performed by persons liable to VAT based on Section 99 of the Tax Code, as amended by E.O. 273. Neither is it subject to the percentage tax under Section 119 of the same Code. LLjur Very truly yours, JOSE U. ONG Commissioner of Internal Revenue