Club Filipino

September 25, 2009 BIR RULING [DA-(VAT-089) 571-09] 105; S-30; DA-345-08 Club Filipino Club Filipino Avenue (formerly Mckinley St.) Corner Eisenhower Street, Greenhills Subdivision San Juan, Metro Manila Attention: Ms. Salvacion B. Bata Asst. Finance Manager Gentlemen : This refers to your letter dated May 21, 2009, requesting for exemption from payment of value-added tax (VAT) for member's dues transaction. It is represented that Club Filipino, with Taxpayer's Identification No. 000-178-231-000, is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Certificate of Registration No. 335841 dated October 18, 1967. In reply, please be informed that pursuant to Section 105 of the Tax Code of 1997, as amended, which provides that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added (VAT) imposed in Sections 106 to 108 of the same Code. DCaSHI The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. If Club Filipino is engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, it shall be liable to VAT (BIR Ruling No. S30-27-2003 dated November 21, 2003 & DA-043-2004 dated February 4, 2004). It should be noted, further, that VAT is an indirect tax payable by the seller and not by the purchaser of goods. Being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer must pay in order to obtain the goods or services. Thus, the shifting of the VAT to Club Filipino does not make it the person directly liable and therefore, it cannot invoke its tax exemption privilege under Section 30 of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. EHTCAa Moreover, notwithstanding that it is a non-stock, non-profit corporation, its importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code. Thus, it has been ruled in the case of The Camillian Fathers, Inc. that ". . . if your client imports goods, the said importation shall be subject to VAT. . . ." (VAT Ruling No. 119-90 dated May 14, 1990 and BIR Ruling No. DA-043-2004 dated February 4, 2004). Revenue from "contributions, membership dues and donations", not being derived from sale of services or sale of goods made in the course of business but rather in connection with Club Filipino's non-stock, non-profit activities, is exempt from the 12% VAT. However, the above exemption from the 12% VAT does not extend to its purchase of goods or properties or services and importation of goods. 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