Philippine Information Agency Subject to VAT

February 6, 1998 BIR RULING NO. 014-98 102; 105; 107-000-00-014-98 Kapisanan Ng Mga Brodkaster Sa Pilipinas 6th Floor, LTA Building, 118 Perea Street Legaspi Village, Makati City Attention: Mr . Butch S . Canoy President Gentlemen : This refers to you letter dated December 8, 1997 stating that your members regularly receive broadcast order for airtime from the Philippine Information Agency (PIA); that to insure that the said broadcast orders for airtime are given proper tax treatment, you are inquiring if the VAT requirement applies to PIA regarding government plugs for airing in radio and TV stations. More specifically, you are requesting a ruling on the following: "1. Is the PIA subject to VAT? "2. Are contracts entered into for airtime subject to VAT? "3. If these contracts are under PD 1362, will such contracts be subject to VAT?' LibLex In reply, please be informed that government entities and instrumentalities, including government-owned or controlled corporations, are subject to VAT. As an agency of the government, PIA shall be subject to VAT if in the course of trade or business, it sells, barters, exchanges or leases goods or properties, or renders services and import goods. With regard to question No. 2, please be informed that the buying and selling of TV airtime constitutes rendition of services to others for a consideration subject to the 10% value-added tax under Section 102(a) of the Tax Code. (BIR Ruling No. 135-91 dated July 16, 1991) As lessor, TV and radio broadcasting station owners are the ones primarily liable to the payment of VAT although they can pass on to PIA the amount of tax as part of cost, pursuant to Section 105 (formerly Section 99) of the Tax Code of 1997. Finally, P.D. No. 1362 allowing broadcasting and television stations to import radio or television equipment, spare parts and allied technical and program materials to be used exclusively in their broadcast operations without prepayment of customs duty and compensating tax (now VAT) in return for the use by the Government of the radio or television time and/or other facilities of the former on the basis of the approved contract or contracts entered into with the Department of Public Information (now PIA), has been repealed by the general repealing clause of Section 29 of E.O. No. 273 which provides that "the provision of any law, whether general or special, rules and regulations and other issuances or parts thereof which are inconsistent with this Order (E.O. 273) are hereby repealed, amended or modified accordingly". Such being the case, radio and television stations are subject to VAT on their importation of radio and television equipment, spare parts and allied technical and program materials, inspite of contracts entered into by and between said radio and television stations and the PIA, pursuant to Section 101(a) of the Tax Code, as amended by E.O. 273, as further amended by R.A. Nos. 7716 and 8241 [now Section 107(A), Tax Code of 1997]. prcd Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue