Request for Exemption from VAT on Housing Rental Payments

November 27, 1996 BIR RULING NO. 132-96 99; 102 (a) Vat Ruling 007 132-96 Mr. Carlos P. Gavino 29 Adonis Street, Acropolis Subdivision Quezon City, Metro Manila S i r : This refers to your letter dated October 18, 1996 addressed to Mr. Jorge Briones, Deputy Executive Director, Coordinating Council of the Philippine Assistance Program, requesting exemption from payment of the value-added tax on housing rental payments beginning October 24, 1996. cdti It appears that you have taken up the post of BOT-LGU Financial Adviser under a consultancy contract of the Coordinating Council of the Philippine Assistance Program (CCPAP) PAP support Project funded by the United States Agency for International Development; (USAID) for a period of two (2) years from September 16, 1996; and that under section 19 A of the Consultancy Contract, you are exempt from all taxes, fees, levies or impositions imposed under laws in effect in the host country since you are not a citizen or permanent resident of the Philippines. Gleaned from your said letter, you have rented from Mrs. Olivia Villarica a house at the abovestated address for a monthly rental of P72,000.00 beginning October 24, 1996; and that obviously, the landlored wants to shift or pass on to you as lessee the amount of VAT on rental services; hence, this request. In reply, please be informed that your request cannot be granted for lack of legal basis. As lessor of real property, Mrs. Villarica is the one primarily liable to the payment of VAT based on her gross receipts under section 102 of the Tax Code, as amended by R.A.. No. 7716. However, since VAT is an indirect tax, the amount of tax may be passed on or shifted to the lessee pursuant to Section 99 of the same Code. Once shifted, it is no longer a tax but an additional cost which the purchaser has to pay to obtain the goods. (Philippine Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967) Accordingly, you cannot invoke your tax exemption privileges to avoid the VAT on rental being billed to you by the lessor of the real property. LLjur Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue