Philippine Software Bridge Business, Inc.

November 20, 2008 BIR RULING [DA-(VAT-042) 451-08] Sec. 108 (B) (3); DA-367-2007 Philippine Software Bridge Business, Inc. 2305B West Tower, Philippine Stock Exchange Center Exchange Road, Ortigas Center Pasig City Attention: Ms. Elma C. Janer Treasurer Gentlemen : This refers to your letter dated July 21, 2008 stating that Philippine Software Bridge Business, Inc. is an IT Export Service Firm in the field of BPO (Third Party Provider of ICT Services) with BOI Certificate No. 2007-08 issued on January 11, 2007. Being a BOI registered company, it is entitled to an income tax holiday for a period of four (4) years or until January 10, 2011. The company's direct export sales are going down hence its strategy is to expand operation to local companies especially to those located in the Economic Zones. In connection therewith, you are now requesting for a ruling that the services to be rendered by your company to all PEZA-registered companies are considered export services in relation to the provisions of Section 108B (3) of the National Internal Revenue Code of 1997. In reply, please be informed that See. 108B (3) provides that "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. (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: (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero percent (0%) rate." It is clear from the afore-quoted provisions of the Tax Code, as amended, that the sale of services to persons or entities whose exemption under special laws such as, R.A. 7916, effectively subjects the supply of services to VAT at zero (0%) rate. Considering that Philippine Software Bridge Business, Inc. is a BOI-registered enterprise enjoying exemption from income tax pursuant to E.O. 226, as amended by R.A. 7916, and its services are rendered to PEZA-registered companies, such services may qualify as export sales subject to VAT at (0%) rate, provided, however, that said service is rendered within the Ecozone or if initially undertaken within the customs territory, the service is implemented within the Ecozone. IATHaS 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