The Fact that the New Airport to be Constructed is for USAID and Probably Financed by it Does Not Exempt from Payment of 10% Value-Added Tax on Gross Receipts Derived from the Contract

February 20, 1996 BIR RULING NO. 015-96 102 000-00 015-96 Dillingham Construction International, Inc. JHM Sport Center, Lagao-Bula Road P.O. Box 221, General Santos City Attention: Mr . Duane E . Buckert Project Manager Gentlemen : This refers to your letter dated August 24, 1995, stating that Dillingham Construction International, Inc. is a construction company based in the United States but currently building the new airport in General Santos City for U.S. Agency for International Development (USAID); that under the terms of your contract with USAID, you are exempt from paying Philippine taxes but the local BIR office thereat told you to have a special tax exempt certificate from this Office to avoid filing and paying VAT; and that you believe that BIR Ruling No. 026-95 giving tax-exempt status to USAID means that Dillingham Construction International, Inc. should continue to file VAT returns showing your receipts from USAID as subject to 0%. LLjur Based on the foregoing, your are requesting for a certificate of exemption from the value-added tax. In reply, please be informed that the fact that the new airport you are constructing is for USAID and probably financed by the latter does not relieve you from the payment of the 10% value-added tax imposed under Section 102 of the Tax Code, as amended by E.O. No. 273, on the gross receipts derived from your foregoing contract, the said tax being your direct tax liability. Such being the case, you request for exemption from the value-added tax cannot be granted for lack of legal basis. cd Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue