United Eferza Academic Publications Co.

February 18, 2010 BIR RULING [DA-(VAT-008) 030-10] 109 (R); DA (VAT-013) 092-08 dtd. 7/30/2008 United Eferza Academic Publications Co. 3rd Floor HEMAC Bldg., J.P. Laurel Highway Tambo, Lipa City, Batangas Attention: Edse L. Mantuano Officer-in-Charge Gentlemen : This refers to your letter dated September 24, 2009 requesting in effect, for exemption from value-added tax (VAT) or 3% percentage tax pursuant to Section 109 (R) of the Tax Code of 1997, as amended, and the purchases of goods and services from suppliers under Section 107 of the same Code. It appears that United Eferza Academic Publications Co. is duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. PG200614476 dated September 12, 2006 with Taxpayer Identification Number (TIN) 006-338-365; and that the primary purpose for which the corporation was formed is to produce and market instructional materials in the form of workbooks and textbooks all year levels-primary and secondary, nationwide. In reply, please be informed that Section 109, par. (R) of the Tax Code of 1997, as amended, 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 the imposition of the VAT. As such, regardless of the amount of the said transaction, you will not be subject to said tax and consequently to the creditable VAT or to the 3% percentage tax under Section 116, in relation to Section 109 (V) of the same Code. In view thereof, your business of publishing and selling of books is exempt from the payment of VAT/creditable VAT and from the 3% percentage tax. However, if you have other transactions such as the printing of brochures, which are subject to the VAT, you will also be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions. Further, VAT is an indirect tax payable by the seller and not 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 United Eferza Academic Publications Co. does not make it the person directly liable and therefore, United Eferza Academic Publications Co. cannot invoke its tax exemption privilege under Section 109, par. (R) of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. Hence, notwithstanding that United Eferza Academic Publications Co. is a publication company, its purchases of goods, properties or services from its suppliers shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code. 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.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Service