Information Analysts Corp.

November 19, 2008 BIR RULING [DA-(VAT-039) 442-08] 108 (B) (2); DA-452-07; DA-332-07 Information Analysts Corp. Exchange Corner Bldg., 107 V.A. Rufino Cor. Esteban and Bolanos Streets Legaspi Village, Makati City Attention: Aileen Dela Cruz Finance Manager Gentlemen : This refers to your letter dated November 7, 2008 requesting for a ruling classifying your transactions as "Automatically Zero Rated Transaction" pursuant to Section 108 (B) (2) of the Tax Code of 1997, as amended. DTCSHA It is represented that Information Analysts Corp. (IAC) is a domestic corporation duly organized and registered under the laws of the Republic of the Philippines with principal place of business at Exchange Corner Bldg. 107 V.A. Rufino cor. Esteban and Bolanos Streets, Legaspi Village, Makati City; that IAC is a 100% export oriented service enterprise and a duly registered taxpayer; that it is engaged in the business of consultation and electronic information processing services in the field of information analysis to customers; and that as a 100% export oriented service enterprise, its services are paid for in acceptable foreign currency duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. In reply, please be informed that Section 4.108-5 (a) & (b) (2) of Revenue Regulations (RR) No. 16-2005, as amended by RR 4-07, provides, viz. : "SEC. 4.108-5. Zero-Rated Sale of Services. (a) In general. A zero-rated sale of service (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations. (b) Transactions 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: xxx xxx xxx (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 of which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP." Moreover, Revenue Memorandum Circular No. 62-2005 provides, viz. : "xxx xxx xxx A-15: A VAT registered person may issue separate invoices/receipts for the taxable, exempt, and zero-rated component of its sales provided that if the sale is exempt from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice or receipt." ISCHET Since IAC's sale of services is governed by Section 108 (B) (2) of the Tax Code of 1997, as implemented by Section 4.108 (a) and (b) (2) of RR No. 16-2005, the same is entitled to the benefit of the zero percent (0%) VAT in accordance with the above cited law and regulations. Thus, the sale of services by IAC shall be considered export and subject to zero percent (0%) VAT. Moreover, IAC's suppliers shall not impute or shift any VAT as part of the cost to be paid by IAC on its purchases. (BIR Ruling No. 013-2003 dated January 20, 2003) As such, IAC's suppliers shall be effectively zero-rated without need to file an application for zero-rating. Thus, IAC's suppliers may issue invoices/receipts with the term "ZERO-RATED SALE" written or printed prominently on the invoice or receipt pursuant to the aforesaid RMC No. 62-2005. (BIR Ruling No. DA-332-07) 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service