Multilingual Inc.

September 26, 2008 BIR RULING [DA-(VAT-010) 263-08] Section 109 (H) Multilingual Inc. 2F Powerhouse Compound 123 A. Lake St. cor. Aurora Blvd. Salapan, San Juan Attention: Mr. Elyse Wynne C. Go President Gentlemen : This refers to your letter dated February 19, 2008 requesting for exemption from value-added tax (VAT). Documentary evidence submitted disclosed that Multilingual Inc. is a non-stock, non-profit educational institution registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. A200605401 dated April 4, 2006. The primary purpose for which it was organized is: "To engage, operate and carry on the business of providing training of various languages to both Filipinos and non-Filipinos alike." The Technical Education and Skills Development Authority (TESDA) has granted Multilingual Inc. Certificates of Program Registration (CoPR) for the following TVET programs: Training Program CoPR No. Date Approved English Language NTR No. 0613040305 October 31, 2006 Korean Language NTR No. 0613040306 October 31, 2006 Mandarin Language NTR No. 0613040307 October 31, 2006 In reply, please be informed that Republic Act (R.A.) No. 9337 amended Section 109 (m) of the Tax Code of 1997. Under R.A. No. 9337, Section 109 (m) was renumbered Section 109 (H) to read as follows: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (H) Educational services rendered by private educational institutions, duly accredited by the Department of Education (DepEd), the Commission on Higher Education (CHED), the Technical Education and Skills Development Authority (TESDA) and those rendered by government educational institutions." DHcTaE Thus, under R.A. No. 9337, TESDA recognized or accredited institutions are exempt from VAT pursuant to Section 109 (H) thereof. In view of the foregoing, Multilingual Inc., a TESDA recognized or accredited institution is exempt from VAT pursuant to Section 109 (H) of the Tax Code of 1997, as amended by R.A. No. 9337. The VAT exemption provided under Section 109 (H) [then Section 109 (m)] of the Tax Code only pertains to the educational services rendered by private educational institutions but does not include their purchases of goods and services. Thus, while the institution is exempt from VAT, it cannot invoke the same exemption privilege to avoid paying VAT on its purchase of goods and/or services even if intended for operational use because its exemption covers only taxes for which it is directly liable, as a seller of educational service. It does not cover VAT, which is an indirect tax on its purchases of goods and services from VAT-registered suppliers. Thus, the 12% (then 10%) VAT for the supply of goods and services may be shifted or passed on to the institution by its VAT-registered suppliers. Once shifted, the VAT will form part of the cost of the goods and/or services supplied to the institution. (VAT Ruling No. 017-02 dated March 20, 2002 and VAT Ruling No. 031-03 dated June 24, 2003). 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service