BIR Ruling [DA-039-04]

February 4, 2004 BIR RULING [DA-039-04] RMC No. 17-96; BIR No. 084-98 Development Academy of the Philippines DAP Building, San Miguel Avenue Pasig City Attention: Segundo JE. Romero, Jr. Executive Vice-President Gentlemen : This refers to your letter dated November 10, 2003 requesting for a clarification on whether or not your sale of services to persons or entities whose exemptions are covered by special laws or international agreements is subject to value-added tax at zero percent (0%). It is represented that the Development Academy of the Philippines (the "Academy") is a government owned and controlled corporation (GOCC) that does not receive any regular subsidy from the government's general appropriation as provided for in the General Appropriations Act (GAA). The "Academy" is a self-financing institution and it generates revenues primarily from programs/projects covered by contracts with other government agencies, as well as other institutions, and from the utilization of conference/training facilities in Tagaytay and Pasig City. As such, its budget disbursement system is dependent entirely on the result of our financial performance. In carrying out its business, the Academy bids for specific government projects for the efficient and effective Management of foreign loans, aids, and grants extended to the Philippine government by foreign funding institutions. It is in that regard that the Academy would like to seek clarification and the BIR's official VAT ruling on zero percent (0%) rate for services rendered to the persons or entities whose exemption are covered by special laws or international agreements to which the Philippine government is a signatory. IaAHCE In reply, please be informed that under Revenue Memorandum Circular No. 17-96 re: "Clarification of Issues Affecting Zero-Rated Sales and Claims for Input Tax Credit/Refund under Republic Act No. 7716 otherwise known as the "Expanded VAT Law" dated February 20, 1996, services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subject the supply of such services to zero-rate. Accordingly, your sale of services to persons or entities whose exemption from tax are covered by special laws or international agreements to which the Philippines is a signatory is subject to value-added tax at zero percent (0%). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group