Black Kite Publishing House

October 16, 2009 BIR RULING [DA-(VAT-088) 603-09] Section 109 (r); Revenue Regulations 6-2001; BIR Ruling [DA-272-07] Black Kite Publishing House 601 First St., Gruar Subdivision, Phase 1, Santo Domingo, Cainta, Rizal, 1900 Attention: Mr. Federico P. Dela Cruz, Jr. General Manager Gentlemen : This refers to your letter dated August 26, 2009 requesting for an exemption from the Value Added Tax pursuant to the provisions of Section 109 (r) of the Tax Code of 1997, as amended. It is represented that, BLACK KITE PUBLISHING HOUSE, is a newly-established company duly registered with the Department of Trade and Industry with Certificate of Business Name Registration No. 00720480. It is further represented that BLACK KITE PUBLISHING HOUSE is engaged in the business of publishing and distributing educational materials such as textbooks, workbooks, worktexts, supplemental enrichment materials and assessment tools for both the public and private schools in the country. In this regard, please be informed that under Section 109 (r) of the Tax Code of 1997, as amended by Republic Act No. 9337 dated July 1, 2005, 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, is exempt from the imposition of the Value Added Tax. Accordingly, BLACK KITE PUBLISHING HOUSE is exempt from the 12% VAT on its publication and printing of books. 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, as amended by R.A. No. 9337. AcEIHC Neither will it be required to pay the 3% percentage tax under Section 116, in relation to Section 109 (v) since both the 12% VAT and 3% percentage tax are taxes on the business transaction or activity. Both are indirect taxes which may be passed on or shifted to the customer who ultimately bears or assumes the burden of the tax. 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% VAT [now 12%] listed in Section 109 (a) to (y) [now Section 109 (A) to (U)] of the same Code as it applies only to transaction/s falling under item (z) [now item (V)] of said section. However, if you have other transactions (such as the printing of brochures) which are subject to the VAT and your gross annual sales and/or receipts exceed the amount of PhP1,500,000, you will also 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). Moreover, since it is engaged in the business of printing and publishing of books, income payments made to BLACK KITE shall be subject to a 2% creditable withholding tax pursuant to Section 2.57.2 (E) (4) (f) of Revenue Regulations (Rev. Regs.) No. 6-2001, as amended. Likewise, 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 from local suppliers like BLACK KITE are subject to the one percent (1%) creditable withholding tax pursuant to Section 2.57.2 (N) of Rev. Regs. No. 6-2001, as amended. This ruling is being issued on the basis of the foregoing facts as you represented. If upon investigation, it will be discovered 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