BIR Ruling [DA-404-98]

September 7, 1998 BIR RULING [DA-404-98] Municipal Telephone Projects Office Department of Transportation and Communications 21st Floor, Strata 100 Bldg., Emerald Ave. Ortigas Center, Pasig City Attention: Mr . Guiling A . Mamondiong Gentlemen : This refers to your letter dated June 3, 1998, in effect, requesting for a ruling as to whether or not you are subject to VAT. cdtech It is represented that Prescon Philippines, Inc . (PRESCON) is the owner of the Condominium office unit presently leased and occupied by you; that PRESCON is requesting you to pay the 10% VAT on your monthly rental; that you have stressed to PRESCON that as a government agency, you do not file VAT return hence, not required to pay the 10% VAT but PRESCON keeps on billing you the 10% VAT. In reply, please be informed that government entities and instrumentalities, including government-owned or controlled corporations are subject to VAT. In the instant case, PRESCON being the lessor, is the one primarily liable to the payment of VAT imposed under Section 108 (A) of the Tax Code of 1997. However, since VAT is an indirect tax, the amount of the tax may be passed on to the buyer of goods or services as part of cost, pursuant to Section 105 of the same Code. Accordingly, the amount of VAT on rental services may be shifted or passed on to you by PRESCON in accordance with the terms and conditions of the lease contract. However, before making payment an account of the lease services, you are required to deduct and withhold the creditable VAT at the rate of 6% pursuant to Section 114 of the Tax Code of 1997. (VAT Ruling No. 024 dated September 23, 1996) cdt Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)