BIR Ruling [DA-382-06]

June 21, 2006 BIR RULING [DA-382-06] 105; VAT 052-02 Ms. Amelita Dayrit-Go Girl Scouts of the Philippines National Headquarters 901 Padre Faura Street 1000 Ermita, Manila M a d a m : This refers to your letter dated February 21, 2006 stating that the Girl Scouts of the Philippines (GSP) is a non-profit organization; that GSP's main source of revenue is membership fees of girl scouts and volunteers; that it is duty-bound to utilize its funds to provide programs and activities for the development of the girls and women; that to augment its funds, you conduct fund raising projects, the proceeds of which are often inadequate; that being an employer to 173 staff nationwide it is also your duty to look after their welfare; that you have a contract with Philamcare Health Systems, Inc. for more than a decade now for their health plan; and that with the implementation of E-Vat and R-VAT, it would be difficult for you to sustain the payment of the quarterly premiums to Philamcare. In connection therewith, you now request for exemption from the payment of value-added tax (VAT) relative to the healthcare plan for the employees of the GSP. In reply thereto, please be informed that your request cannot be granted for lack of legal basis. While GSP may be entitled to tax exemption under the Tax Code of 1997, its exemption only covers taxes for which it is directly liable. The VAT is a tax on the person who sells, barters, exchanges, leases goods or properties, render services, and on any person who imports goods pursuant to Section 105 of the Tax Code of 1997. Thus, the person liable for the payment of VAT is not the purchaser but the seller or importer of goods and services. However, the seller may shift or pass on the 10% (now 12%) VAT to its purchaser as it is an indirect tax. Accordingly, the 10% (now 12%) VAT for the quarterly premiums paid to Philamcare may be passed on to GSP by Philamcare Health Systems, Inc., a VAT-registered entity. Once shifted, it is not longer a tax to GSP but will form part of its cost. 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. IcCATD Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service