Academe Publishing House, Inc.

December 16, 2008 BIR RULING [DA-(VAT-055) 531-08] 109 (R); DA-571-2007; DA-434-2007 Academe Publishing House, Inc. No. 45 Major Dizon Street Industrial Valley Subdivision, IVC Marikina City Attention: Ms. Edna B. Tupas President & CEO Gentlemen : This refers to your letter dated December 8, 2008 stating that Academe Publishing House, Inc. ("APHI") is a corporation duly organized and existing under the laws of the Philippines; that it is engaged in the publishing of quality books for elementary and high school for the past seventeen (17) years; and that recently, the Department of Education ("DepEd") required APHI to submit a Certificate of Value-Added Tax (VAT) Exemption in relation to its transactions with the said agency. Based on the foregoing representations, you now request for confirmation of your opinion that the publication of the above textbooks for elementary and high school levels by APHI is exempt from VAT pursuant to Section 109 (R) of the Tax Code of 1997, as amended by Republic Act No. 9337. In reply thereto, please be informed that Section 4.109-1 (B) (r) of Revenue Regulations No. 16-2005, implementing Republic Act (R.A.) No. 9337, provides that "(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;" shall be exempt from VAT. Prescinding from the above-cited provisions, it is clear that there are four (4) activities that are exempt from the coverage of VAT, i.e., sale, importation, printing and publication of books, newspapers, magazines, reviews and bulletins. (BIR Ruling No. DA-571-2007 dated October 26, 2007 citing BIR Ruling No. DA-434-2007) from the foregoing, and since APHI is engaged in the publication of elementary and high school textbooks, specifically for the DepEd, your opinion that it is exempt from VAT is hereby confirmed. Accordingly, APHI's publication transactions with the DepEd are not subject to VAT imposed under Section 108 of the Tax Code of 1997, as amended. Consequently, the said publication transactions with DepEd are not subject to the 5% final VAT required under Section 114 (C) of the Tax Code of 1997, as amended. Moreover, the 3% percentage tax prescribed under Section 116 of the Tax Code of 1997, as amended, does not apply to transactions exempt from the 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. Such being the case, since APHI is exempt from VAT under Section 109 (R) of the Tax Code, it is exempt therefore from the 3% percentage tax imposed under Section 116 of the same. ATcEDS On the other hand, 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. 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 availment of services from local suppliers are subject to the two percent (2%) creditable withholding tax. Only one withholding tax, however, shall be made by the income payor, that is whichever that will yield the higher rate of withholding tax. The tax shall be computed by multiplying the income payment by the rate imposed therein. 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