BIR Ruling [DA-488-03]

December 10, 2003 BIR RULING [DA-488-03] VAT Ruling No. 049-97 PHILCOMSAT Telecoms Plaza Building 316 Sen. Gil Puyat Avenue Makati City Attention: F.L. Aujero Internal Legal Counsel Gentlemen : This refers to your letter dated November 27, 2001 requesting confirmation of your opinion to the effect that your lease of internet services to University of the East Ramon Magsaysay Medical Center (UERMMC) is subject to VAT. It is represented that PHILCOMSAT is engaged in providing satellite-based services to clients and one of them is UERMMC; that UERMMC is a non-stock, non-profit educational institution and a registered non-VAT taxpayer whose exemption from taxes and duties on all its revenues and assets used actually, directly and exclusively for educational purposes as of February 2, 1987, was confirmed in BIR Ruling No. ENPS-014-94 dated August 2, 1994; that you have communicated to UERMMC that its exemption covers only all its revenues derived from its operation as an educational institution and the lease of circuit which is payable to PHILCOMSAT is an expense, not a revenue, and necessarily is not subject of its exemption. HcTIDC Your contention is correct. As lessor of internet services, PHILCOMSAT is liable to the 10% VAT under Section 108(A) of the 1997 Tax Code but you can pass on to UERMMC the amount of tax as part of the cost of the internet services rendered by you. Since there is no showing that UERMMC is exempt from indirect tax, it cannot claim exemption from the 10% VAT being passed on by you because VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee, or lessee of the goods, properties or services. ( Section 105, Tax Code of 1997 ) Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group