Mrs. Elvira E. Abacan

April 27, 2007 BIR RULING [DA-272-07] Section 109 (y); VAT Ruling No. 055-02 Mrs. Elvira E. Abacan Proprietor Shekinah Publishing & Printing Press 1 Bignay St., Doa Josefa Village Almanza, Las Pias City M a d a m : This refers to your letter dated February 6, 2007 requesting for exemption from payment of value-added tax (VAT). As represented, Shekinah Publishing & Printing Press is a newly established publisher and printer. It is engaged in the publication and printing of books used in public and private schools. From December 2006 to January 2007, it has delivered books to the Department of Education-Makati. In reply, please be informed that Section 109 (R) [then Section 109 (y)] of the Tax Code of 1997 as amended by Republic Act (RA) No. 9337 provides, viz: "SEC. 109. Exempt Transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (R) Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements . . . " Accordingly, Shekinah Publishing & Printing Press is exempt from the 12% VAT on its publication and printing of books. Moreover, its sale of books to local government units, whether provincial, city or municipal, is not subject to the 5% final VAT required under Section 114 (C) of the Tax Code of 1997, as amended by R.A. No. 9337. Neither will it be required to pay the 3% percentage tax under Section 116, in relation to Section 109 (z) [then Section 109 (z)] of the Tax Code of 1997 as amended by RA No. 9337 since both the 12% (then 10%) VAT and 3% percentage tax are taxes on the business transaction or activity. Both are indirect taxes which may be passed on or shifted to the customer who ultimately bears or assumes the burden of the tax. In VAT Ruling No. 037-2001 dated June 13, 2001, this Office had the occasion to rule that the 3% percentage tax prescribed under Section 116 of the Tax Code of 1997 does not apply to transactions exempt from the 12% VAT listed in Section 109 (a) to (y) [now Section 109 (A) to (U)] of the same Code as it applies only to transaction/s falling under item (z) [now item (V)] of said section. However, if you have other transactions (such as the printing of brochures) which are subject to the VAT and your gross annual sales and/or receipts exceed the amount of PhP1,500,000, you will also be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions (Revenue Memorandum Circular No. 62-2005). Moreover, pursuant to Section 2.57.2 (E) (3) (f) of Revenue Regulations (Rev. Regs.) No. 6-2001, as amended, a creditable income tax at the rate of 2% shall be withheld on income payments to printers, bookbinders, lithographers and publishers except those principally engaged in the publication or printing of any newspaper, magazine, review or bulletin which appears at regular intervals, with fixed prices for subscription and sale. The tax is computed by multiplying the income payment by 2%. aAHSEC Likewise, Section 2.57.2 (N) of Rev. Regs. No. 6-2001, as amended, provides that income payments, except any single purchase which is P10,000.00 and below, which are made by a government office, national or local, including government-owned or controlled corporations, on their purchases of goods from local suppliers are subject to the one percent (1%) creditable withholding tax. The tax is also computed by multiplying the income payment by 1%. 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 as null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service