BIR Ruling [DA-213-99]

April 7, 1999 BIR RULING [DA-213-99] Erlinda's Manufacturing Dao Street, Saint Anthony Subdivision Cainta, Rizal Attention: Ms . Erlinda C . San Mateo General Manager Gentlemen : This has reference to your letter dated September 4, 1998 requesting clarification as to whether or not as a business enterprise exempt from all taxes as provided for under R.A. 6810, otherwise known as the "Kalakalan 20", you are exempt from the value-added tax (VAT) passed on to you on your purchases of goods. In reply, please be informed that the grant of exemption as mentioned above is limited only to taxes for which you are directly liable. Since VAT is an indirect tax, it can be passed on to you and once shifted, if forms part of the cost of goods that you purchase. The shifting of the 10% VAT to a purchaser does not make you directly liable for the payment of the VAT; hence, you cannot invoke your exemption privilege to avoid the passed-on VAT. (VAT Ruling No. 032-91 dated May 29, 1991) LLjur Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)