BIR Ruling [DA-486-03]

December 10, 2003 BIR RULING [DA-486-03] 105 VAT Ruling No. 015-93 Zamboanga City Electric Cooperative, Inc. Putik Main Office Bldg., Zamboanga City Attention: Mr. Pedro A. Araneta, Jr. General Manager Gentlemen : This refers to your letter dated December 28, 2000 stating that your cooperative is exempted from paying all taxes including value-added-tax (VAT); that SMART Communications, Inc. persistently charge the 10% VAT on the monthly billing of cell phones issued to your officers and employees; that you have procured from the BIR the Certificate of Registration as a Non-VAT taxpayer and sought the opinions of several BIR officials regarding your exemption from VAT; and that you exclude the VAT charges in your payments to the said company which prompted the latter to disconnect your phone lines due to unpaid accumulated balance. Based on the foregoing, you now request for a ruling exempting you from paying VAT which SMART Communications, Inc. includes in your monthly billing. In reply, please be informed that the exemptions granted to cooperatives under Articles 61 and 62 of Republic Act No. 6938 otherwise known as the "Cooperative Code of the Philippines", is limited only to taxes for which these cooperatives are directly liable. In this regard, since value-added-tax is an indirect tax which can be passed on or shifted as part of the cost of the goods sold/services rendered, VAT can be passed on as part of the cost of the goods sold to the Cooperative, notwithstanding the tax exemption privileges granted under R.A. 6938. THaAEC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group