Habitat For Humanity Philippines Foundation, Inc.

April 27, 2007 BIR RULING [DA-274-07] Sec. 105 S-30-009-2006 Habitat For Humanity Philippines Foundation, Inc. Unit 12-A, 12/F PET Plans Tower #444 EDSA, Guadalupe Viejo, Makati City Attention: Ms. Marcia Yogore Administrator Gentlemen : This refers to your letter dated March 01, 2007 requesting for VAT Exemption Certificate as required by your suppliers and donors. As represented, Habitat For Humanity Philippines Foundation, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 151521 dated May 23, 1988; that you had been granted Tax Exemption Certificate under BIR Ruling No. 526-88 dated November 04, 1988; that likewise, you had been granted Certificate of Registration as a Donee Institution dated September 07, 2004; that the purpose or purposes for which the foundation was formed is to provide an institutional framework or entity for sponsoring specific projects in habitat development, including the rendering of assistance to, by way of collaborative efforts with, qualified and deserving persons in need of acquiring modest but adequate housing, all on a non-profit and interest-free basis, to associate and work in cooperation with other groups and agencies functioning with purposes kindred to those of the foundation, specifically: in witnessing the Gospel of Jesus Christ throughout the world by working in cooperation with God's people in need to create a better habitat which to live and work, in witnessing to the Gospel of Jesus Christ through loving acts and spoken and written word, in enabling an expanding number of persons from all walks of life to participate in the ministry, and to accept donations and contributions in money or in kind, and to receive and maintain assets of the Foundation any property, real or personal, granted by gift, devise or bequest, or acquired by purchase or either onerous mode from any person, firm, trust, association or corporation, and to hold, administer and dispose of the same in accordance with and pursuant to the provisions of the Articles of Incorporation; and that no part of its net income shall inure to the benefit or profit of any private individual or entity, nor be distributable as dividend, compensation, or any other form of remuneration or pecuniary benefit to its trustees, officers, members, donors or contributors. In reply, please be informed that Section 105 of the Tax Code of 1997, as amended, provides that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added (VAT) imposed in Section 106 to 108 of the same Code. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government, entity. If Habitat for Humanity Philippines Foundation, Inc. is engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, it shall also be liable for VAT (BIR Ruling No. S30-27-2003 dated November 21, 2003 & DA-043-2004 dated February 4, 2004). Moreover, the tax exemption granted to Habitat for Humanity Philippines Foundation, Inc. as a non-stock, nonprofit corporation under Section 30 of the Tax Code of 1997 covers only income taxes for which it is directly liable. It should be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to Habitat for Humanity Philippines Foundation, Inc. does not make it the person directly liable and therefore, it cannot invoke its tax exemption privilege under Section 30 of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. Revenue from "contributions, membership dues and donations," not being derived from sale of services or sale of goods made in the course of business but rather in connection with Habitat for Humanity Philippines Foundation, Inc. non-stock, nonprofit activities, is exempt from the 12% VAT. However, the above exemption from the 12% VAT does not extend to its purchase of goods or properties or services and importation of goods. Hence, notwithstanding that it is a non-stock, nonprofit corporation, its purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code. Thus, it has been ruled in the case of The Camillian Fathers, Inc. that ". . . if your client imports goods, the said importation shall be subject to VAT. . . . " (VAT Ruling No. 119-90 dated May 14, 1990 and BIR Ruling No. DA-043-2004 dated February 4, 2004). aEDCSI 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 thus ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service