BIR Ruling [DA-210-06]

April 5, 2006 BIR RULING [DA-210-06] DA 055-02 Bases Conversion and Development Authority BCDA Corporate Center 2/F Bonifacio Technology Center 31st Street, Crescent Park West Bonifacio Global City Taguig, Metro Manila Attention: Gen. Narciso L. Abaya (Ret.) President & CEO Gentlemen : This refers to your letter dated November 14, 2005 stating that the Bases Conversion and Development Authority (BCDA) is a value-added tax (VAT) registered government owned and controlled corporation; that BCDA leased its one (1) hectare parcel of land in Fort Bonifacio to Victory Christian School, a non-stock, non-profit educational institution duly registered with the Securities and Exchange Commission (SEC) on April 27, 2002; that under the lease contract, it provides that "VAT is excluded and for the account of the lessee"; that Victory Christian School claimed that it is not subject to VAT since it is tax exempt pursuant to paragraph 3, Section 4, Article XIV of the 1987 Constitution; and that on January 20, 2003, Victory Christian School was issued by the BIR a certificate of tax exemption. In connection therewith, you now request for an opinion as to whether or not Victory Christian School can invoke its tax exemption privilege from the payment of VAT relative to the contract of lease passed on to it by the BCDA. In reply thereto, please be informed that the 10% [now 12%] 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. Once shifted, the VAT forms part of the cost of goods and services purchased ( Phil. Acetylene Co. vs. CIR , CTA Case No. 708, September 17, 1965). Since the exemption from taxes and duties of a non-stock, non-profit educational institution, like Victory Christian School, does not include exemption from indirect tax, BCDA can legally pass on to Victory Christian School the 10% [now 12%] VAT as part of the invoice price of the aforesaid lease. Accordingly, Victory Christian School is liable to pay the 10% [now 12%] VAT on the said contract of lease. ( BIR Ruling No. DA055-02 dated April 1, 2002 ) 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.) PABLO M. BASTES, JR. OIC-Head Revenue Executive Assistant Legal Service