Bukidnon Filipino-Chinese Chamber of Commerce and Industry, Inc.

October 1, 2009 BIR RULING [DA-(DT-055) 575-09] Section 30 (F); BIR Ruling No. S30-27-03, DA-043-04 & DA-618-04 Bukidnon Filipino-Chinese Chamber of Commerce and Industry, Inc. Aglayan, Malaybalay City Bukidnon Attention: Mr. Ramon Lim Gentlemen : This refers to your letter dated August 11, 2009 requesting for tax exemption on all school building projects that you will undertake within the locality. As represented, you are a non-stock, non-profit organization registered with the Securities and Exchange Commission. You are a registered Chapter of the Federation of Filipino-Chinese Chambers of Commerce and Industry, Inc. (FFCCCII). Your funds come from donations, solicitations and other similar grants. You also donate, grant and accord financial help and food to schools, barangays, organizations and other entities during any calamity, fiesta and other events where the concerns of people need such help or assistance. The exemption can help fast-track the needed infrastructure project of the Provincial Government such as classrooms and school buildings of the Elementary and High School levels. The cost is far below the standard costing by the Department of Public Works and Highways (DPWH) which is favorable to the Government. In reply, please be informed that the tax exemption granted to you as a non-stock, non-profit corporation under Section 30 (F) of the National Internal Revenue Code (NIRC), as amended, covers only income taxes for which you are directly liable. Your exemption does not include value-added tax (VAT). Accordingly, if you are engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, you shall also be liable for VAT (BIR Ruling No. S30-27-2003 dated November 21, 2003 & DA-043-2004 dated February 4, 2004). DHCcST It should be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to you does not make you the person directly liable and therefore, you cannot invoke your tax exemption privilege under Section 30 of the NIRC to avoid the passing on or shifting of the VAT. However, gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government is exempt from the payment of the donor's tax pursuant to Section 101 (A) (2) of the NIRC. Accordingly, if you will donate the school building to a political subdivision of the Government i.e., Department of Education, the aforementioned donation of school building shall be exempt from the payment of donor's tax pursuant to Section 101 (A) (2) of the NIRC. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service