BIR Ruling [DA-364-06]

June 9, 2006 BIR RULING [DA-364-06] VAT Ruling No. 107-99; Sec. 4.109-1 (g), RR 16-2005 Hi-Precision Diagnostic Center Incorporated 674 N.S. Amoranto St., Sto. Domingo, Quezon City Attention: Rodelyn C. Talan Accountant Gentlemen : This refers to your letter dated March 6, 2006, requesting for a ruling from this Office for the purpose of VAT exemption from your suppliers. It is represented that Hi-Precision Diagnostic Center Incorporated (" Hi-Precision " for brevity) is a corporation duly organized and existing under Philippine law with SEC Registration No. AS096-005460 on May 27, 1996. It is further represented that Hi-Precision is engaged in the business of providing medical, dental and health services to the public through the corporation's medical personnel and its owned medical facilities. Hi-Precision now seeks a confirmatory ruling from this Office that it is considered as VAT-exempt under Section 4.109-1 (B)(1)(g) of Revenue Regulations (RR) No. 16-2005, with respect to sales to it by its suppliers. In reply, please be informed that Section 4.109-1 (B)(1)(g) of RR 16-2005 provides that: "SEC. 4.109-1. VAT-Exempt Transactions . xxx xxx xxx (B) Exempt transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (g) Medical, dental, hospital and veterinary services, except those rendered by professionals . Laboratory services are exempted. If the hospital or clinic operates a pharmacy or drug store, the sale of drugs and medicine is subject to VAT. " xxx xxx xxx As stated in the above provision, medical, dental and veterinary services not rendered by professionals are exempt from VAT. When it provides facilities, equipment and treatment for the purpose of attending to the medical needs of its clients, Hi-Precision is regarded as an entity rendering the above-mentioned non-professional services and is accordingly exempt from VAT on such services. SaETCI This exemption, however, applies only to taxes for which Hi-Precision is directly liable, i.e ., VAT on gross receipts, and does not apply to taxes which are being passed on to it by its suppliers. Consequently, as regards purchases of goods and services by Hi-Precision, the VAT thereon paid by the supplier can be passed on to it and ultimately be considered as added cost of the goods and services procured (VAT Ruling No. 132-90 dated May 14, 1990 and VAT Ruling No. 040-91 dated May 29, 1991). 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service