BIR Ruling [DA-427-03]

November 25, 2003 BIR RULING [DA-427-03] 109 (y) & (n); 106 VAT 069-02 Asian, Books, Inc . 5-B Ayala Bridgeway Ayala Center Mall, Makati City Attention: Catherine Lopez-Uy Operation Manager Gentlemen : This refers to your letter dated October 21, 2003 requesting for a VAT-Exempt status considering that you are selling VAT-Exempt goods, like books and magazines under Section 109(y) of the Tax Code of 1997. As indicated in its Articles of Incorporation submitted to this Office, Asian Books, Inc.'s primary purpose is to buy, sell, import, export, trade, distribute, or otherwise deal in books, magazines, periodicals, stationaries, office supplies, school supplies and other goods or things which may be subject of lawful commerce. In reply, please be informed of the following: 1. Pursuant to Section 109(y) of the Tax Code of 1997, "the sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements" is exempt from value-added tax. Furthermore, the term " book " shall be that as provided for under Section 3(a) and (b) of R.A. No. 8047 and as defined by the United Nations Educational Scientific and Cultural Organization (UNESCO), viz, " a printed non-periodical publication of at least forty-eight (48) pages, exclusive of cover pages, published in the country and made available to the public :" In respect to the sale of magazines and newspapers, or newsletter, the law requires that in order that the same may be exempted from VAT, such newspaper, magazine, review or bulletin must appear at regular intervals with fixed price for subscription and sale and which is not devoted principally to the publication of paid advertisements. In the absence of the above criteria, your sale of magazines and newspapers or newsletter shall be subject to the 10% VAT. On the other hand, since pamphlets do not qualify in the definition of "books", the sale of the same is subject to the 10% VAT. Moreover, the sale of "literary works" is exempt from VAT if it is made by the artist himself pursuant to Section 109(n) of the Tax Code of 1997; otherwise, the sale or importation, shall be subject to the 10% VAT. 2. Likewise, since office and school supplies are basically items not exempt from the payment of VAT, your gross receipts therefrom shall be subject to the 10% VAT. On the other hand, if the gross receipts from the sale of educational materials and equipment other than those items which are VAT exempt under Section 109 of the Tax Code of 1997, do not exceed the amount of five hundred fifty thousand pesos (P550,000) during the taxable year the same shall, in lieu of the VAT, be subjected to the 3% percentage tax on the gross sales or receipts under Section 116 of the same Tax Code. (VAT Ruling No. 026-00 dated August 21, 2000) TEcAHI Finally, considering that you are engaged both in VAT and VAT exempt transactions, your gross receipts/sales from VAT exempt transactions ( i.e. , books and newspaper, magazine, review and bulletin) must be segregated from VATable items, henceforth, you are required to keep a separate non-VAT invoice/receipt for the purpose. (VAT Ruling No. 026-00 dated August 21, 2000) This ruling is being issued of 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group