BIR Ruling [DA-108-96]

March 11, 1996 BIR RULING [DA-108-96] Dateline Cargo Express International, Inc. Rm. 306 East Wing, Velco Center Bldg. Cor. Chicago & 13th Sts. Port Area, Manila Attention: Mrs . Maria Socorro D . Lim President & General Manager Gentlemen : This refers to your letter dated March 21, 1994 requesting for clarification as to whether or not the NATIONAL POWER CORPORATION (NAPOCOR) was indeed exempt from paying value-added tax (VAT) on the brokerage services your company rendered to it on October 25, 1993 regarding the shipment of one case parts of Ervor Air Compressor under Bill of Lading No. 0162948. It is represented that your company is engaged in the sale of brokerage services and that you are aware that all companies engaged in the sale of goods and services are subject to 10% VAT on the gross sales/receipts arising from the said sale; that majority of your clients acknowledge your billed brokerage fees of which computations are based on the Bureau of Customs Administrative Order (CAO) No 3-89 plus the 10% VAT; that NAPOCOR is one of your clients but it continuously disregards your VAT charges of 10% contending that the brokerage fees you charge to it are already inclusive of VAT; but that as per certification issued to you by the Federation of Customs Brokerage Companies of the Philippines (FCBCPHIL), the uniform rates prescribed under the aforesaid CAO No. 3-89 being charged by Licensed Customs Brokers for their brokerage services in the Port of Manila, Manila International Container Port and the Ninoy Aquino International Container Port do not include VAT; that last November 10, 1993, NAPOCOR refused to pay the 10% VAT amounting to P269.76 on the brokerage fee you charged to it amounting to P2,697.63 contending that it is tax-exempt and the said brokerage fee was already inclusive of VAT as per an alleged BIR Ruling on the matter. In reply, please be informed that pursuant to the last paragraph of Section 102 of the Tax Code, as amended by Executive Order No. 273 dated July 25, 1987, the term "gross receipts" is defined as follows: "Gross receipts means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, EXCLUDING VALUE ADDED TAX." In relation to this, Sec. 102(b)(1) of the same Code further provides that if VAT is billed as a separate item in the invoice, the said tax shall be based on the gross receipts, excluding the tax. Your VAT Invoice No. 4334 dated November 10, 1993 issued to NAPOCOR for the brokerage services you rendered to it for the shipment of one case parts of Ervor Air Compressor clearly showed that your brokerage fee was billed as a separate item in the said invoice. Accordingly, the 10% VAT amounting to 269.76 on the subject brokerage services should be based on your gross receipts of P2,697.63. It is therefore our opinion as we hereby hold that NAPOCOR's contention that the subject brokerage fee was already inclusive of VAT as per an alleged BIR Ruling is devoid of merit and without any legal basis. Besides, the tax exemption privilege of NAPOCOR cannot be invoked in this case because its exemption from the payment of indirect taxes is limited only to its importation and/or purchases of petroleum products and not on its purchases of other goods or services . (Maceda vs. Macaraig, Jr., 223 SCRA 217 promulgated on June 8, 1993; DA-102-96 dated March 7, 1996 BIR Ruling No. 373-93 dated September 15, 1993) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner Legal Service