BIR Ruling [DA-179-05]

April 20, 2005 BIR RULING [DA-179-05] 106 (D) (1); R.R. 8-99; DA-305-2004 National Intelligence Coordinating Agency 5 V. Luna Road, Quezon City Attention: Mr. Vicente A. Adecer, Jr. Assistant Director General For Administration Gentlemen : This refers to your letter dated March 28, 2005 requesting for a ruling on whether the contract amount of P150,000,000.00 between the Philippine National Construction Corporation ("PNCC") and National Intelligence Coordinating Agency ("NICA") pertaining to the construction of NICA-NSC building is inclusive of VAT. It is represented that NICA withheld taxes from every payment made on progress billings and remitted the same to the BIR; that PNCC was also being furnished corresponding certificates of tax withheld; that after the project had been completed, the final billing had been paid and the retention had been released, the PNCC is claiming additional amount allegedly pertaining to the 10% VAT which they claimed as not part of the contract price. In reply, please be informed that VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services as part of the cost. ( Sec. 105, Tax Code of 1997 ) Section 1 of Revenue Regulations (RR) No. 8-99 also provides, to wit: "SEC. 1. Scope . All VAT-registered taxpayers who are required under Section 237 of the 1997 Tax Code to issue receipts or sales or commercial invoices are no longer allowed to separately bill the value-added tax corresponding thereto. The amount appearing in the sales invoices/receipts is thus deemed inclusive of the value-added tax due thereon." By virtue of the aforecited provisions of the Tax Code and RR No. 8-99, this Office is of the considered opinion that the PNCC can shift or pass on the 10% VAT imposed on the sale of construction services as part of its contract price or cost of its services. However, PNCC is not allowed to separately bill the VAT corresponding thereto. The amount appearing in the invoice or receipt is presumed to include the VAT due thereon. ( BIR Ruling No. DA-305-2004 dated June 6, 2004 ) It is worth mentioning that the value-added tax does not form part of the gross receipts. In determining the amount of the VAT which is presumed included in the invoice, the same shall be computed by multiplying the total amount indicated in the official receipt or invoice by one-eleventh (1/11). ( Sections 106(D)(1) and 108(C), 1997 Tax Code ) ADCTac 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 and Inspection Group