Jica Enterprises

August 13, 2008 BIR RULING [DA-(VAT-015) 139-08] Sec. 109 (R); R.A. 9337; DA-215-07 Jica Enterprises 16 Horizon St., North Rim View Park, SSS Village, Marikina, Metro Manila Attention: Mr. Romeo G. Calooy, Jr. Proprietor S i r : This refers to your letter dated July 15, 2008 requesting exemption from value-added tax (VAT) and consequently from the 5% final creditable VAT as prescribed in Section 114 (C) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337, as implemented by Revenue Regulations No. 16-2005, as amended. It is represented that JICA ENTERPRISES ("JICA" for brevity) is engaged in the printing, publication and sale of school textbooks especially to local government units (LGUs); that JICA is registered with the BIR under Certificate of Registration No. OCN 3RC 00001457 dated January 8, 2002; and that in view of enactment of R.A. 9337 and in the course of its recent transactions, JICA was requested to provide its clients with a ruling from the BIR granting it exemption from the payment of 12% VAT, hence, this request for exemption. In reply, please be informed that Section 109 (R) [then Section 109 (y)] of the Tax Code of 1997 as amended by Republic Act (R.A.) No. 9337 provides, viz. : "SEC. 109. Exempt Transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (R) 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 . . . ." Accordingly, this Office holds that JICA is exempt from the 12% value-added tax on its sale, importation, printing or publication of school textbooks. Moreover, its sale of books to local government units, whether provincial, city, or municipal, is not subject to the 5% final VAT required under Section 114 (C) of the Tax Code of 1997. In VAT Ruling No. 037-2001 dated June 13, 2001, this Office had the occasion to rule that the 3% percentage tax prescribed under Section 116 of the Tax Code of 1997 does not apply to transactions exempt from the 10% (now 12%) VAT listed in Section 109 (A) to (V) of the same Code as it applies only to transactions falling under item (V) of the said section. However, if JICA has other transactions (such as printing of brochures) which are subject to the VAT and your gross annual sales and/or receipts exceed the amount of P1,500,000.00, you will be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions (Revenue Memorandum Circular No. 62-2005) . cSEaDA Moreover, pursuant to Section 2.57.2 (E) (3) (f) of Revenue Regulations (Rev. Regs.) No. 6-2001, as amended, a creditable income tax at the rate of 2% shall be withheld on income payments to printers, bookbinders, lithographers and publishers except those principally engaged in the publication or printing of any newspaper, magazine, review or bulletin which appear at regular intervals, with fixed prices for subscription and sale. The tax is computed by multiplying the income payment by 2%. Likewise, Section 2.57.2 (N) of Rev. Regs. No. 6-2001, as amended, provides that income payments, except any single purchase which is P10,000.00 and below, which are made by a government office, national or local, including government-owned or controlled corporations, on their purchases of goods of local suppliers are subject to the one percent (1%) creditable withholding tax. The tax is also computed by multiplying the income payment by 1%. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. aEcHCD Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service