BIR Ruling [DA-667-04]

December 28, 2004 BIR RULING [DA-667-04] Sec. 109 (y); VAT Ruling No. 078-02; 047-2003 F & J De Jesus, Inc. 7636 Guijo corner Sacred Heart Street San Antonio Village, Makati City Attention: Mr. Fidel A. De Jesus President Gentlemen : This refers to your letters dated November 17, 2004 and December 9, 2004 stating that your company is engaged in selling books to students, schools (both private and public) and other clients; that most of the books that your company is selling are imported ( i.e., NCLEX Reviewer and other medical review books, children's books and other academic text books); that these imported books contain Audio Video VHS/CD/VCD/DVD and/or Educational Toys which are part and parcel of the same; that the Audio Video VHS/CD/VCD/DVD is an instructional guide for the user of the book which will enable the said user to understand more the subject matters contained therein; that on the other hand, the Educational Toys ( i.e., miniature replica of musical instruments, animals, fruits, trees, flowers, food, and/or any other objects) are used for demonstration purposes in order for the students/children to have a near reality visual grasp of the objects pictured in the books; that the books and the Audio Video VHS/CD/VCD/DVD and/or Educational Toys are bundled and are not sold separately by the supplier/manufacturer, or in other words, your company cannot purchase a book without the instructional Audio Video VHS/CD/VCD/DVD and/or the Educational Toys, and vice-versa, you cannot buy the Audio Video VHS/CD/VCD/DVD and/or the Educational Toys without the book; that the foregoing materials are mere accessories to the books and are included therein free of charge and have no given value; that it is your opinion that the importation and sale of your books, including the Audio Video VHS/CD/VCD/DVD and/or the Educational Toys, is exempt from the payment of value-added tax (VAT), hence, you are requesting for a confirmation of the same to this Office. In reply thereto, please be informed that Section 109 (y) of the Tax Code of 1997, as amended, provides, viz. : "SEC. 109. Exempt Transactions. The following shall be exempt from the value-added tax: "xxx xxx xxx (y) 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 and; . . . ." TEcHCA Accordingly, F & J De Jesus, Inc. is exempt from VAT on its sale, importation, printing or publication of educational books ( i.e., NCLEX Reviewer and other medical review books, children's books and other academic text books). Consequently, its sales of books to public schools or to any government entity is not subject to the 3% withholding VAT required under Section 114 (C) of the Tax Code of 1997, as amended (VAT Ruling No. 078-2002 dated November 20, 2002). Likewise, the Audio Video VHS/CD/VCD/DVD and/or the Educational Toys (used for demonstration purposes), which form part of the imported books and are considered as bonus materials, as these items were given free of charge by the supplier or manufacturer of the books and are bundled with the books (the foregoing items cannot be purchased separately), are exempt from VAT. Moreover, in view of the effectivity of Republic Act (R.A.) No. 8792, also known as the "Electronic Commerce Act of 2000", documents/messages/information electronically written capable of being sent, received, recorded, stored, downloaded, transmitted, retrieved and finally reduced into printed form are basically considered as print media (VAT Ruling No. 047-2003 dated November 25, 2003). Such being the case, the CD included in the imported books which are considered as electronic writing and can be reduced into print media, are exempt from VAT on their importation and sale. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group