Advances or Deposits for Work Not Yet Started or Accomplished are Includible as Part of the Gross Receipts Subject to 10% VAT

June 1, 1992 BIR RULING NO. 181-92 102 (a),last par. 000-00 181-92 Makati Development Corporation Ayala Alabang Village Alabang, Muntinlupa, M.M. Attention: Mr . Ramel R . Mella AVP-Comptroller Gentlemen : This refers to your letter dated March 31, 1992 stating that prior to the effectivity of the VAT law, you used to pay the 4% contractor's tax on advances received at the time these are liquidated through actual accomplishments. prll Accordingly, you now request for a confirmation that these could still be continued under the VAT system. In reply, please be informed that under Section 102(a), last par. of the Tax Code, as amended by Executive Order No. 273, gross receipts is defined as follows: "Gross receipts means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the service and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax." The reason why advance payments and deposits for work not yet accomplished are already included in the contractor's gross receipt subject to VAT is that the receipt thereof are generally acknowledged with VAT-registered receipts which generate input tax-credit in the hands of the holder. It is our opinion that such advances or deposits for work not yet started or accomplished are includible as part of the gross receipts subject to 10% VAT, without waiting for liquidation through actual accomplishments. cdt Very truly yours, JOSE U. ONG Commissioner of Internal Revenue