BIR Ruling [DA-327-00]

August 28, 2000 BIR RULING [DA-327-00] Gateway Rural Bank, Inc . Balagtas, Bulacan Attention: Ms . Mercedes S . Coloma Corporate Secretary Gentlemen : This refers to your letter dated June 18, 1998 requesting, in effect, for a ruling as to whether or not you are exempt from the payment of value-added tax (VAT) on your purchase of one (1) unit Honda Civic VTI from Honda Cars, Quezon City, Inc. as provided under Section 15 of R.A. No. 7353 which reads as follows: "Sec. 15. All rural banks created and organized under the provision of this Act shall be exempt from the payment of all the taxes, fees and charges of whatever nature and description, except the corporate income tax and local taxes, fees and charges for a period of five (5) years from the commencement of operation." In reply, please be informed that only the taxes that are relevant to the operations of a rural bank and taxes for which it is directly liable are covered by the aforesaid tax exemption clause. VAT is an indirect tax the amount of which may be shifted or passed on to the buyer by the seller of goods and services pursuant to Section 105 of the Tax Code of 1997. Accordingly, the VAT passed on to you in your purchase of one (1) unit Honda Civic VTI is no longer a tax but an additional cost which becomes part of the amount of the contract price to be paid by you. (BIR Ruling Nos. DA111-97 dated March 19, 1997; 169-95 dated October 25, 1995) Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI OIC-Deputy Commissioner (Legal & Inspection Group)