Sale of Car to a Private Non-Stock, Non-Profit Philanthropic Corporation, Not Exempt from VAT

April 13, 1999 BIR RULING NO. 047-99 105-23-92-047-99 Nissan Southwood Carmona, Cavite Toll Plaza South Luzon Expressway Calabarzon Attention: Mr . Charlie M . Barromeda Comptroller Gentlemen : This refers to your letter dated January 30, 1998 stating that you are engaged in the business of selling cars; and that one of your customers is the International Center for Living Aquatic Resources Management (ICLARM), a private non-stock, non-profit philanthropic corporation. Based on the foregoing, you are requesting that your sale of car to ICLARM be exempt from VAT pursuant to Section C (1), Article IV of Resolution No. 62 of the Headquarters Agreement between the Government of the Republic of the Philippines and the International Center for Living Aquatic Resources Management which provides, viz: "C. Taxation and Customs "1. The provisions of existing laws or ordinances to the contrary notwithstanding, ICLARM, or its successors, shall be exempt from all taxes. This exemption shall extend to goods imported by ICLARM intended for its official used. "xxx xxx xxx" In reply, please be informed that your request cannot be granted for lack of legal basis. It is clear that tax exemption of ICLARM under the aforequoted provision covers only taxes for which it is directly liable and does not extend to indirect taxes, like VAT. Pursuant to Section 99 of the Tax Code, as amended by R.A. No. 7716 and as further amended by R.A. No. 8241 (now Section 105 of the Tax Code of 1997), VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee of goods, properties or services. The VAT on your sale of car is your direct tax liability. However, when passed on to ICLARM, it is no longer a tax but an additional cost which becomes a part of the amount of the contract price to be paid by ICLARM. (Philippine Acetylene Co. vs. CIR, G.R. No. L-19707, August 17, 1967). Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue