Servant Communities Foundation, Inc.

March 2, 2007 BIR RULING [DA-134-07] Section 30, NIRC; BIR Ruling No. S30-047-2001 Servant Communities Foundation, Inc. Rm. 501 Citiland Shaw Tower Shaw Blvd. Cor. St. Francis Streets 1552 Mandaluyong City Attention: Dr. Vicencio S. Santos President Gentlemen : This refers to your letter dated December 6, 2006, requesting certificate of tax exemption from Value-Added Tax (VAT) on your payment to Heritage Hotel for the use of the place on December 1-3, 2006 for an international convention you held. It is represented that Servant Communities Foundation, Inc. (Servant, for short) is a religious foundation duly registered with the Securities and Exchange Commission (SEC) on April 15, 2002; that you operate as an umbrella organization of various Catholic Charismatic servant communities; that last December 1, 2 & 3, 2006 at the Heritage Hotel, you conducted an international convention; that the hotel charged you VAT on food and accommodation; that you now request for tax exemption on the bases that you are a foundation under Section 30 of the Tax Code of 1997. DaHISE In reply, please be informed that the tax exemption granted to 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 lease of the goods, properties or services. Once shifted to the buyer/customer as additional 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 to Servant does not make it the person directly liable and therefore, it can not invoke its tax exemption privilege under Section 30 of the Tax Code of 1997 to avoid the passing on or shifting of the VAT. ECSHID 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% VAT. However, the above exemption from the 12% VAT does not extend to its purchases of goods or properties or services and importation of goods. Hence, notwithstanding that it is a non-stock, non-profit corporation, its purchases of goods or properties and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Sec. 107 of the said Code. (VAT Ruling No. 11-90 dated May 14, 1990 and BIR Ruling No. DA-043-2004 dated February 4, 2004) Accordingly, the Servant Communities Foundation, Inc. is not exempt from the VAT being billed by Heritage Hotel on its payment for food and accommodation during the three (3)-day international convention in their venue, as this VAT is shifted to it as additional to the cost of goods or services rendered by the Hotel. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service