BIR Ruling [DA-012-03]

January 16, 2003 BIR RULING [DA-012-03] Hon. Oscar S. Moreno 1st District, Misamis Oriental House of Representatives Quezon City S i r : This refers to your letter dated December 26, 2002 requesting on behalf of the Balingasag Medicare Community Hospital (BMCH) for exemption from the payment of the 10% value-added tax on the importation of hospital equipment and medical supplies being donated to it by the Michigan-based World Medical Relief, Inc. It is represented that the BMCH is a duly licensed and DOH-registered primary-general hospital located in Balingasag, Misamis Oriental; that BMCH became the beneficiary of certain hospital equipment and medical supplies through the donation of Michigan-based World Medical Relief, Inc.,an international granting institution with the specific mission of providing medical and health care to indigents and poor patients through the provision of second-hand or used medical equipment for ill-equipped and deserving poor hospitals in the country; that two (2) 20-foot containers laden with various medical equipment and supplies are now on their way to the Philippines aboard separate vessels, the first shipment will be arriving on or about January 10, 2003 while the second container is expected to arrive in early February 2003; that the beneficiary of said donation is neither a VAT-registered nor a VAT-paying institution but a government charity hospital; and that the donated items are also subject to the specific prohibition of their resale or use by any entity other than the donee. In reply thereto, please be informed that under Section 105 of the Tax Code of 1997, the value-added tax is a tax on "any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods." The VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization, or government entity. Accordingly, the importation of hospital equipment and medical supplies by BMCH, being the donee of Michigan-based World Medical Relief, Inc., is subject to the 10% value-added tax imposed under Section 107(A) of the Tax Code of 1997. ( VAT Ruling No. 032-96 dated October 30, 1996 ) This Office regrets that your request for exemption from the 10% VAT cannot be granted for lack of legal basis. AECcTS Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group