BIR Ruling [DA-077-04]

February 20, 2004 BIR RULING [DA-077-04] Secs. 24 (A), 105, 106, 108 & RR 2-08 BIR Ruling No. 238-90, 53-98 & DA-46-01; VAT-013-89 & VAT-005-00 Alabang Country Club, Inc. Ayala Alabang Village Muntinlupa, Metro Manila Attention: Mr. Lawrence M. Jalbuena General Manager Gentlemen : This refers to your letter dated October 24, 2003 requesting for a ruling that raffle to be sponsored by your Club dubbed as "Super Raffle 2003" is not subject to the 10% value-added tax. It is represented that the Alabang Country Club, Inc. was organized not for profit or financial gain but to promote social, recreational and athletic activities among the members; that it is not engaged in trade or business; that you are contemplating a raffle as part of your year-end affair to thank your members for their consistent support of the various activities of the Club. 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 tax (VAT) imposed in Sections 106 and 108 of this Code" (cited in VAT Ruling No. 005-2000 dated January 27, 2000). The proceeds of the raffle is not one derived from the sale of goods or services made in the course of business but rather in connection with the non-profit activity of the Club. Moreover, in VAT Ruling No. 013-89 dated January 1, 1989, this Office held that payments not resulting from the engaging of a taxable activity are not subject to VAT (BIR Ruling No. 238-90 dated December 19, 1990). Based on the foregoing representations, your raffle activity is therefore not subject to VAT. dctai However, Section 2.57-1 of Revenue Regulations No. 2-98, as amended, implementing Section 24(A) of the Tax Code of 1997 provides that: "Sec. 2.57-1. Income Payments Subject to Final Withholding Tax . The following forms of income shall be subject to final withholding tax at the rates herein specified; (A) Income payments to a citizen or to a resident alien individual; (1) . . . prizes (except prizes amounting to ten thousand pesos (P10,000) or less which shall be subject to tax under Section 24(A) of the Code) and other winnings (except Philippine Charity Sweepstakes winnings and Lotto winnings), derived from sources within the Philippines Twenty percent (20%)." In view of the foregoing, the prizes for your "Super Raffle 2003" which are more than P10,000.00 are subject to the 20% final withholding tax whereas the prizes amounting to P10,000.00 or less shall be subject to tax under Section 24(A) of the Tax Code of 1997 (BIR Ruling No. 053-98 dated May 8, 1998 and BIR Ruling No. DA-046-01 dated March 22, 2001) . 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group