Myriad Human Resources & Services, Inc.

May 28, 2008 BIR RULING [DA-322-08] VAT006-06 Myriad Human Resources & Services, Inc. 941 P. Lopez Street Mandaluyong City Attention: Ms. Michelle J. Searby Vice President-Operations Gentlemen : This refers to your letter dated May 15, 2008 stating that your company is a 100% Filipino-owned landbased recruitment agency; that it is duly registered with the Securities and Exchange Commission (SEC) and duly licensed by the Philippine Overseas Employment Administration (POEA) to undertake recruitment and placement of overseas contract workers; that it is registered as a value-added tax (VAT) taxpayer with the Revenue District Office (RDO) No. 041, Mandaluyong City; that currently, it provides services to foreign principals by sending contract workers abroad and charge the respective principals for an agency fee which is being paid in foreign currency and remitted inwardly through the banking system; and that your company likewise charge and collect placement fees from the workers (subject to prior approval of the principal and as allowed by the POEA) equivalent to one-month salary denominated in Philippine currency. Based on the foregoing representations, you now request for an opinion as to whether the placement fees paid by your foreign clients in foreign currency and in accordance with the BSP rules and regulations are subject to VAT at zero percent (0%) rate pursuant to Section 108 (B) (2) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337, as implemented by Revenue Regulations No. 16-2005 and whether the placement fees charged to Overseas Filipino Workers (OFW) as allowed by the POEA are taxable at 12% VAT. In reply thereto, please be informed that Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005, as amended by Revenue Regulations No. 4-2007, provides that: "(b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: xxx xxx xxx (2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; xxx xxx xxx" Considering that the placement fees charged to foreign clients, representing consideration for recruitment services rendered by your company in the Philippines are paid for in foreign currency, it is safe to conclude that the same falls within the purview of Section 108 (B) of Tax Code of 1997, as amended by R.A. No. 9337, as implemented by Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005, as amended by Revenue Regulations No. 4-2007. Conversely, the placement fees charged to OFWs are subject to the 12% VAT. SUCH BEING THE CASE, this Office holds that the services rendered by your company to its foreign clients and paid for in foreign currency are subject to VAT at zero percent (0%) rate. 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service