Organizational Change Consultants International Center for Learning, Incorporated

February 18, 2009 BIR RULING [DA-(VAT-023) 095-09] R.A. No. 9337 Organizational Change Consultants International Center for Learning, Incorporated Penthouse, Emerald Building No. 24 F. Ortigas, Jr. Road Ortigas Center, Pasig City Attention: Ms. Ma. Soledad D. Lopez President Gentlemen : This refers to your letter dated November 5, 2008 requesting, in effect, for a ruling that your school is exempt from the payment of value-added tax (VAT) on educational services. Documents show that Organizational Change Consultants International Center for Learning, Incorporated (formerly, Organizational Change Consultants International Incorporated) is registered with the Securities and Exchange Commission (SEC) under Company Registration No. ASO95-007256 on July 27, 1995. Its primary purpose is "to establish and operate a center for learning which shall provide courses of study in vocational-technical curriculum and similar short-term activities such as but not limited to technical training and language skills for call center agents and the public in general, subject to the laws of the Philippines . . . ." Technical Education and Skills Development Authority (TESDA), Pamamarisan District Officer-in-Charge Ma. Lourdes O. Villanueva has favorably endorsed the application of Organizational Change Consultants International Center for Learning, Incorporated. 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. 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, Organizational Change Consultants International Center for Learning, Incorporated, shall be exempt from VAT pursuant to Section 109 (H) of the Tax Code of 1997, as amended by R.A. No. 9337 only after it has been accredited and granted by TESDA the authority to operate technical-vocational courses. For this purpose, it is required to present a Certificate of TVET Program Registration issued by TESDA. However, this exemption does not extend to other activities involving sale of goods and services which are subject to VAT imposed under Sections 106 and 108 of the same Code. Hence, as long as Organizational Change Consultants International Center for Learning, Incorporated will not engage in the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto, it will remain exempt from VAT (BIR Ruling No. 248-88 dated June 6, 1988; BIR Ruling No. DA-040-02 dated March 7, 2002; and BIR Ruling No. S30-027-2003 dated November 21, 2003). On the other hand, Organizational Change Consultants International Center for Learning, Incorporated's purchases, i.e. , materials for repairs of its facilities, are subject to VAT imposed under Section 106 of the Tax Code of 1997, as amended. Such tax payment may legitimately be passed on to customers like non-stock, non-profit educational institutions (BIR Ruling No. 248-88 dated June 6, 1988). 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service