First Data Corporation

July 30, 2008 BIR RULING [DA-(VAT-012) 089-08] First Data Corporation 3/F Citibank Center 8741 Paseo de Roxas Makati City Attention: Mr. Redentor P. Caguioa Vice President-Internal Support Gentlemen : This refers to your letter dated May 9, 2008 stating that your company is a value-added tax (VAT) registered entity; that it is engaged in trading of IT products and services; that its customers are mostly schools, colleges and universities that are VAT exempt or Non-VAT registered entities; and that they do not want you to pass the 12% VAT to them considering that they are VAT exempt. Based on the foregoing representations, you now request for a ruling as to whether or not the above-mentioned Non-VAT entities are not liable to pay the 12% VAT being passed on to them by a VAT-registered entity. In reply thereto, please be informed that this Office had already occasion to rule on the matter when it said in BIR VAT Ruling No. 063-02 dated September 16, 2002, that ". . . 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". Accordingly, your purchases of goods or services . . . are not exempt from VAT." In stressing the rationale of the above-mentioned rule, this Office elucidates the matter that since the above-mentioned entities are Non-VAT registered entities and are non-stock, non-profit educational institutions exempt from income tax under Section 30 (H) of the Tax Code of 1997 and/or under the 1987 Philippine Constitution, their tax exemption can not be extended to indirect taxes like VAT. Accordingly, their purchases of goods and services from a VAT-registered entity are nevertheless subject to VAT as imposed under Sections 106 to 108 of the Tax Code of 1997, as amended by Republic Act No. 9337, as implemented by Revenue Regulations No. 16-2005. aTEACS 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service