Ligaya ng Panginoon Foundation, Inc.

January 23, 2007 BIR RULING [DA-034-07] 24 (A); DA-072-2002 Ligaya ng Panginoon Foundation, Inc. 41 Stella Maris St., Bo. Kapitolyo Pasig City Attention: Ms. Estrella A. Regala Chief Accountant Gentlemen : This refers to your letter dated August 2, 2006, in effect requesting for an opinion that Ligaya ng Panginoon Foundation, Inc., a non-stock, non-profit domestic corporation accredited by the Philippine Council for NGO Certification (PCNC) as a donee institution is exempt from value-added tax (VAT). In reply, please be informed that Section 105 of the Tax Code of 1997 provides that 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 shall be subject to the value-added (VAT) imposed in Sections 106 to 108 of the same Code. 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 (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. ACcaET Accordingly, if Ligaya ng Panginoon Foundation, Inc. is engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, it shall also be liable for VAT (BIR Ruling No. S30-27-2003 dated November 21, 2003 & DA-043-2004 dated February 4, 2004). Moreover, any tax exemption granted to it as a non-stock, non-profit corporation under Section 30 of the Tax Code of 1997 covers only income taxes for which it is directly liable. It should be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT does not make Ligaya ng Panginoon Foundation, Inc. the person directly liable and therefore, you cannot invoke your tax exemption privilege under Section 30 of the Tax Code of 1997 to avoid the passing on or shifting of the VAT. cDCIHT Revenue from contributions and donations, not being derived from sale of services or sale of goods made in the course of business but rather in connection with its non-stock, non-profit activities, is exempt from the 12% (then 10%) VAT. However, the above exemption from the 12% VAT does not extend to its purchase of goods or properties or services and importation of goods. Hence, notwithstanding that it is a non-stock, non-profit corporation, its purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code (VAT Ruling No. 119-90 dated May 14, 1990 and BIR Ruling No. DA-043-2004 dated February 4, 2004). CIDcHA Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service