Matiere SAS

October 27, 2009 BIR RULING [DA-(VAT-093) 622-09] 22 (I); 28 (B) (1); 42 (A) (4) (1); BIR Ruling 136-89; VAT Ruling 234-88; DA 252-07; DA-032-02; DA 361-08 Matiere SAS (Philippine Representative Office) 8/F APMC Building 136 Amorsolo cor. Gamboa Sts. Legaspi Village, Makati City Attention: Ysmael Tinio Consultant Gentlemen : This refers to your letter dated October 2, 2009 requesting for a ruling exempting Matiere SAS (Philippine Representative Office) from the payment of corporate income tax and value-added tax. prcd It is represented that Matiere SAS (Philippine Representative Office) is registered with BIR Revenue District Office 047 with Tax Identification No. 274-034-362-000; that Matiere SAS acts as a Representative Office of Matiere, a foreign corporation organized under the laws of France duly licensed to transact business in the Philippines under SEC Registration No. FS200708111; that as a representative office, Matiere SAS only acts as a liaison office and undertakes the following activities, viz. : creating a market presence in the Philippines, conducting market research, advertising products, disseminating information, acting as communication center, promoting company products, facilitating orders from its head office's customers and supervising the implementation of contracts between the parent company and local partners; and that, as a representative office, Matiere SAS derives no income from its activities. In reply, please be informed that a representative office is a non-resident foreign corporation not engaged in any income generating business in the Philippines. As can be viewed from its licensed activities, Matiere SAS is a representative office. Accordingly, Matiere SAS is not subject to income tax. Hence, it is exempt from filing of the corporate income tax return (BIR Ruling No. 136-89 dated July 4, 1989). A person is subject to value added tax (VAT) if it renders service "in the course of trade or business" (Section 105, 1997 Tax Code). Inasmuch as the operation of the representative office is similar to regional or area headquarters of multinational corporations which are exempt from VAT under Section 109 (p) of the 1997 Tax Code, representative offices are also exempt from VAT. Moreover, since Matiere SAS merely enables the overseas head office to maintain some presence in the country, and is not engaged in any income-generating activity in the Philippines, it is qualified for exemption from VAT. However, this exemption applies only to VAT directly due from representative offices (VAT Ruling No. 234-88 dated May 25, 1988). Moreover, you are further advised that if you have employees, they are subject to the following income tax rates pursuant to Section 2.57.1 (D) of Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. 6-2001, as further amended by Rev. Regs. No. 12-2001, implementing Section 58 of the 1997 Tax Code: a. If a Filipino citizen, whether resident or non-resident, or a resident alien graduated tax rates of 5%-32%; b. If a non-resident alien engaged in trade or business in the Philippines graduated tax rates of 5%-32%; c. If a non-resident alien not engaged in trade or business in the Philippines 25%. 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 as null and void. IaDSEA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service