Puyat Jacinto & Santos

October 2, 2008 BIR RULING [DA-(VAT-012) 272-08] Sec. 108 (B) (2); DA-060-06 Puyat Jacinto & Santos 12th Floor, Manilabank Bldg. 6772 Ayala Avenue, Makati City Philippines Attention: Atty. Virginia B. Viray and Atty. Arnaldo M. Cario Gentlemen : This refers to your letter dated 3 September 2008 requesting for confirmation of your opinion that the sale of services of ACE INTOUCH INC. ("Ace InTouch" for brevity) is entitled to the benefit of the zero percent value-added tax (VAT). aDECHI It is represented that Ace InTouch is a corporation duly organized and existing under Philippine laws with principal office address at Unit 2204 Prestige Tower, F. Ortigas Junior Road, Ortigas Center, Pasig City; that the primary purpose of the corporation is to engage in the business of contact centers/call center, business process outsourcing and other allied services; that on 8 January 2008, it was registered with the Bureau of Internal Revenue as a VAT taxpayer under VAT Registration Certificate No. 3RC0000393397, pursuant to Section 107 of the National Internal Revenue Code; that as an operator of a fully functional inbound and outbound call center, Ace InTouch provides customer relationship management services involving research, database management, data mining and systems integration to numerous clients located outside the Philippines; that for the services rendered, service fees are received by way of inward telegraphic transfer in foreign currency and in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas ("BSP"). In reply, please be informed that Section 6 of R.A. 9337 provides: "Sec. 6. Section 108 of the Tax Code, as amended, is hereby further amended to read as follows: "A. Rate and Base of Tax. . . ." "B. Transactions Subject to Zero Percent (0%) Rate . The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0) rate: "1. . . . "2. Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)." "xxx xxx xxx." In addition, Section 4.108.5 (b) (2) of Revenue Regulations No. 16-2005, provides: CHDaAE "Sec. 4.108-5. Zero-Rated Sale of Services . "(a) . . . "(b) Transaction Subject to Zero Percent (0%) VAT Rate . The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: "(1) . . . "(2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP." "xxx xxx xxx." Accordingly, the sale by Ace InTouch of the above-described information services to its foreign clients, paid for in foreign currency that is accounted for in accordance with the rules and regulations of the BSP, falls squarely within the purview of the above-quoted law and regulations. Hence, your opinion that the same is entitled to the benefit of the zero percent VAT is hereby confirmed. 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