Combined Gross Receipts from Both Lines of Business shall be Determinative of VAT Liability

February 8, 1994 BIR RULING NO. 044-94 100, 102 000-00 044-94 Lopez, Jao, Laroco, So & Co., CPAs Unit 215, Synita Building Kayang Street, Baguio City Attention: Ms . Juliana L . So Partner M a d a m : This refers to our letter dated June 25, 1993 on behalf of your clients, the spouses Mark Eric Perez and Ma. Luisa Perez. As represented, Mr. Perez is a professional photographer who owns Photo Technique with his own Tax Identification Number (TIN). On the other hand, his wife Luisa owns Je Reviens Beauty Parlor with her own TIN. As such, each entity pays the 2% percentage tax as a non-VAT registered entity. At the end of the year, the spouses filed their income tax return jointly but opted to compute their taxes separately. However, the BIR regional office (i.e, Revenue Region 1A, CAR) accused the couple for VAT deficiency because their combined gross receipts amounted to P273,745.50 which exceeded the selling of P200,000. Contrary to this, the chief of the Legal Branch of the regional office clearly expressed that the assessment is not valid because there are two separate business entity involved distinct from each other. The P200,000 limit should be applied separately for each business entity. (See attached letter) Based on the foregoing, you now seek for a clarificatory ruling on the said issue because there seems to be a different interpretation by different authorities. In reply, please be informed that this Office does agree with the decision of the chief of the Legal Branch Revenue Region 1A. Since the business operations of the spouses are deemed to have entered into an unregistered partnership for the conduct of both business activities registered under their respective names, therefore the combined gross receipts from both lines of business shall be determinative of their liability to VAT. Hence, they are liable to be assessed for VAT deficiency based on the combined aggregate gross annual receipts. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue