ABS-CBN Foundation, Inc.

April 27, 2007 BIR RULING [DA-273-07] Section 114 (C) ABS-CBN Foundation, Inc. Mother Ignacia Avenue cor. E. Lopez St. Brgy. South Triangle Quezon City Attention: Ms. Zen Dimalanta Program Director Education through Multi-Media Gentlemen : This refers to your letter dated February 20, 2007 requesting, in effect, for a ruling that the PDAF allocation of Senator Pangilinan for the ETV Project through the Department of Education Regional offices is not subject to the 5% final withholding VAT. DCTHaS As represented, the ABS-CBN Foundation, Inc. is a non-stock, non-profit SEC-registered non-government organization. It has been working in partnership with the Department of Education for more than a decade now. One of its flagship projects is the Educational Television (ETV), which is being implemented by the Education through Multi-Media Program. The ETV Project aims to improve the quality of public education through the production of curriculum-based shows for children, distribution of ETV materials to public schools (courtesy of donations by sponsors), and utilization of the ETV materials (teacher training, monitoring, and evaluation). For several years now, the Foundation has solicited donations for ETV sets/materials for distribution to public elementary schools. Both the private/corporate sector as well as government officials have supported the Foundation's ETV Project in this manner. On the government side, Senators and House of Representatives have allocated portions of their Priority Development Assistance Fund (PDAF) for this purpose. On the local government front, Governors and Mayors have apportioned some of their Special Education Fund for the ETV Project. Since 2004, the Honorable Senator Francis Pangilinan has supported the Foundation's ETV Project through the distribution of ETV sets/materials to public elementary schools nationwide. Last year, the Office of Senator Pangilinan coursed the PDAF allocation for the ETV Project through the Department of Education Regional offices. In the course of project implementation, the DepEd Region 5 Office has deducted ( sic ) 4% from the total project amount of PhP1 Million coursed through that office; presuming that the acquisition of the ETV materials constitute a "sale of goods." In reply, please be informed that the transaction is without consideration and is not a taxable event for VAT purposes since it is not a sale, barter or exchange made to the Department of Education but is in fact an exempt donation pursuant to Section 101 (A) (3) of the Tax Code of 1997, by the Office of Senator Pangilinan in favor of ABS-CBN Foundation, Inc. more particularly for its ETV Project, which amount was taken from Senator Pangilinan's PDAF, the allocation of which was coursed through the Department of Education Regional offices. Since, it is not subject to any tax, no final withholding VAT is payable and collectible. SACHcD 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