BIR Ruling No. 075-12

February 10, 2012 BIR RULING NO. 075-12 Sec. 109 (H), 1997 NIRC, as amended; VAT Ruling No. 049-98 Safeguard Security Development Academy, Inc. 10/F Manufacturers Building Plaza Sta. Cruz, Manila Attention: Ms. Thelma S. del Rosario Finance Director Gentlemen : This refers to your letter dated October 7, 2009 requesting in effect, for a ruling that your school is exempt from the payment of value-added tax (VAT) on educational services. Documents show that Safeguard Security Development Academy, Inc. is registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS200609041 on June 20, 2006. Its primary purpose is to establish and operate technical and vocational courses and was issued Technical Education and Skills Development Authority (TESDA) Certificate of TVET Program Registration No. WTR No. 0613022114 and WTR No. 0613022115 to offer program in Security Services NC I and Security Services NC II, respectively, on September 20, 2006. In reply, please be informed that Republic Act (RA) No. 9337 amended Section 109 (m) of the Tax Code of 1997. Under RA 9337, Section 109 (m) was renumbered Section 109 (H) to read as follows: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (H) Educational services rendered by private educational institutions, duly accredited by the Department of Education (DepEd), the Commission on Higher Education (CHED), the Technical Education and Skills Development Authority (TESDA) and those rendered by government educational institutions." DaScAI Thus, under RA 9337, TESDA recognized or accredited institutions are exempt from VAT pursuant to Section 109 (H) thereof. However, this exemption does not extend to other activities involving sale of goods and services which are subject to VAT imposed under Sections 106 and 108 of the same Code. Hence, as long as Safeguard Security Development Academy, Inc. will not engage in the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto, it will remain exempt from VAT. (VAT Ruling No. 049-98 dated December 2, 1998) On the other hand, Safeguard Security Development Academy, Inc. purchases, i.e., materials for repairs of its facilities are subject to VAT imposed under Section 106 of the Tax Code of 1997, as amended. Such tax payment may legitimately be passed on to customers like non-stock, non-profit educational institutions. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue