BIR Ruling No. 049-12

February 9, 2012 BIR RULING NO. 049-12 Sections 105 to 108 of the Tax Code of 1997, as amended; BIR Ruling No. 007-10 dated May 28, 2010 Philippine Council on Accreditation of Healthcare Organization, Inc. Room 401, 4/F Delta Building, West Avenue BRGE West Triangle, Quezon City Attention: Dr. Tomas P. Maramba Jr. President Gentlemen : This refers to your letter dated February 21, 2011, requesting for a certification that the Philippine Council on Accreditation of Healthcare Organizations, Inc. (PCAHO) is VAT exempt. AEIDTc As represented, PCAHO is a non-stock, non-profit corporation duly registered and existing under the laws of the Republic of the Philippines and organized for the benefit of its members, with Securities and Exchange Commission (SEC) Reg. No. 199914655 and Bureau of Internal Revenue (BIR) Certificate of Registration No. OCN-3RC0000397863. In reply, please be informed that Section 105 of the Tax Code of 1997 provides that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of the same Code. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (Irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. Accordingly, if PCAHO is engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, it shall also be liable for VAT (BIR Ruling No. 007-10 dated May 28, 2010). It should be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to it does not make it the person directly liable and therefore, (even assuming that if PCAHO would qualify as a non-stock, non-profit corporation under Section 30 (C) of the Tax Code of 1997, as amended or a beneficiary society, order or association, operating for the exclusive benefit of the members) , it cannot invoke its tax exemption privilege under Section 30 of the Tax Code of 1997 to avoid the passing on or shifting of the VAT. Hence, notwithstanding that it is a non-stock, non-profit corporation, its purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code (BIR Ruling No. 007-10 dated May 28, 2010). IaEASH 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue