Regino Law Office

November 25, 2009 BIR RULING [DA-(VAT-101) 703-09] 108; RR 16-2005; RR 4-2007; DA-119-06; VAT Ruling No. 080-99; DA (VAT-014) 286-2008; DA-(VAT-009) 075-08; VAT Ruling No. 034-2004 Regino Law Office 110 F. Zobel Street Makati City Attention: Atty. Nazario B. Regino Gentlemen : This refers to your letter requesting on behalf of your client, E-Money Plus, Inc., for confirmation that the sale of services by E-Money Plus, Inc. to its "receiving agents" abroad is subject to value-added-tax at zero (0%) rate. Background E-Money Plus, Inc. is a corporation duly registered with Securities and Exchange Commission (SEC) with principal office at 9th Floor, ELJ Communications Center Building, Eugenio Lopez Drive, South Triangle, Quezon City. It is also registered with the BIR as a VAT-registered taxpayer with TIN No. 207-438-825-000. Its primary purpose is to establish and maintain money remittance services. E-Money Plus, Inc. provides services of processing inward remittances received from "receiving agents" abroad. These agents, such as foreign banks and the like, receive the remittances of OFWs and other persons. Service and transaction fees are collected by the receiving agents from such persons in the form of their respective foreign currencies, and all the transactions are consummated abroad. The receiving agents, in turn, transmit the principal via bank to bank transfers to a foreign E-Money Plus account in the Philippines for remittance. Consequently, the principal is then transferred to E-Money Plus, Inc., for proper distribution of the remittances to their respective recipients. After distribution, billing is then sent abroad. In reply, please be informed that Section 108 (B) (2) of the Tax Code of 1997, as amended, provides that: CcHDaA "Section 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate. xxx xxx xxx (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Implementing the above provision is Section 4.108-5 (b) (2) of Revenue Regulations (RR) No. 16-2005, as amended by RR No. 4-2007, wherein the sale of services made by VAT-registered supplier to nonresident persons not engaged in business who is outside the Philippines when the services are performed (such as the receiving agents) is considered subject to VAT at zero percent (0%) rate, to wit: "SECTION 4.108-5. Zero-Rated Sale of Services. xxx xxx xxx (b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: xxx xxx xxx (2) Services other than those mentioned in the preceding paragraph tendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" Hence, the sale of services by E-Money Plus, Inc. to its receiving agents, i.e., foreign banks and the like (a non-resident foreign corporation not engaged in business in the Philippines), falls within the VAT zero-rated sale of services contemplated by Section 108 (B) (2) of the Tax Code of 1997 as implemented by Section 4.108-5 (b) (2) of RR No. 16-2005. (BIR Ruling No. DA (VAT-014) 286-2008 dated October 13, 2008) IDCHTE 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