BIR Ruling [DA-279-04]

May 17, 2004 BIR RULING [DA-279-04] Sec. 105 DA-S-30-100-2000 Rotary International 172 Salcedo St., Legaspi Village Makati City Attention: Mr. Mark Vieth Controller, Rotary International Gentlemen : This refers to your letter dated November 18, 2003 requesting for exemption from payment of value-added tax (VAT). It appears that Rotary International is a non-stock, non-profit association organized and existing under the laws of the State of Illinois, U.S.A.; that on June 18, 1996, it filed with the Securities and Exchange Commission (SEC) an application for license pursuant to Section 125 of the Corporation Code of the Philippines and the Foreign Investments Act of 1991, proposing to establish its branch office in the Philippines to encourage, promote, extend and supervise Rotary in the Philippines; to coordinate and generally direct the activities of Rotary International in the Philippines; to render improved service to Rotarians, Rotary clubs and district governors by shortening lines of communication; to respond to mails and/or written and telephone communications expeditiously; that on June 26, 1996 Rotary International was licensed by the Securities and Exchange Commission (SEC) to transact business in the Philippines under SEC Registration No. A199601480; and that Rotary International is not an income generating association. In reply, please be informed that under Section 105 of the Tax Code of 1997, the 10% VAT is imposed on " 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 tax (VAT) imposed in Sections 106 to 108 of the said 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, non-profit 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. Accordingly, being a non-stock, non-profit corporation, Rotary International shall be subject to the value-added tax if it engages in the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto. ( BIR Ruling No. S-30-100-2000 dated December 26, 2000 ) 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. DETACa Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group