BIR Ruling [DA-152-05]

April 14, 2005 BIR RULING [DA-152-05] 109 (m); 30; 105-108 S30-047-01; DA 043-2004 St. Paul College of Makati D.M. Rivera St., Poblacion Makati City Attention: Sr. Dedicacion Rosario, SPC Directress-Principal Gentlemen : This refers to your letter dated January 25, 2005 requesting for a ruling declaring that being an educational institution, St. Paul College of Makati is VAT exempt. It is represented that St. Paul College of Makati (SPCM) is a non-stock, non-profit educational institution. SPCM is being managed by the Community of the Sisters of St. Paul of Chartres, Inc. As an educational institution, you posit that SPCM is exempt from VAT on the basis of the provision of Section 109(m) of the Tax Code of 1997, which states: "Section 109. Exempt Transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (m) Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (DECS) and the Commission on Higher Education (CHED),and those rendered by government educational institutions. xxx xxx xxx" In reply, please be informed that on the basis of the foregoing provision, this Office believes that it is the services rendered by SPCM as educational institution that is exempt from the coverage of the value-added tax. However, if you engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, you shall be liable to VAT. (BIR Ruling Nos. S30-27-2003 dated November 21, 2003 and DA-043-2004 dated February 4, 2004) Moreover, 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 lessee of the goods, properties or services. Once shifted to the buyer/customer, 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. The shifting of the VAT does not make the non-stock, non-profit organization directly liable and therefore, it cannot invoke its tax exemption privilege under Section 30 of the Tax Code of 1997 to avoid the passing on or shifting of the VAT. Hence, notwithstanding your being a non-stock, non-profit corporation, your purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 10% VAT pursuant to Section 107 of the same Code. Thus, it has been ruled in the case of The Camillian Fathers, Inc. that ". . . if your client imports goods, the said importation shall be subject to VAT . . ." (VAT Ruling No. 119-90 dated May 14, 1990) AcHSEa 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group