Manner of Billing the 10% Value-Added Tax (VAT)

May 4, 1988 BIR RULING NO. 183-88 102 000-00 183-88 Gentlemen : This refers to your undated letter requesting information as to whether the manner of billing the 10% value-added tax (VAT) to your clients as hereinbelow illustrated is correct, viz: Assume Services for a Janitor Basic pay/day x No. of days worked P64.00/day x 26 = P1,664.00 Add: Agency fee 20% 332.80 P1,996.80 Add: Consumed supplies materials (if any) 150.00 P2,146.80 Add: VAT 10% 214.68 P2,361.48 ========= In reply, please be informed that VAT is computed simply by multiplying the total gross receipts, exclusive of the tax, by 10% and bill separately the results in the invoice. In this connection, the term "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 services . . . actually performed or to be performed for another person, excluding value-added tax. (Section 102, Tax Code as amended by E.O. No. 273) Accordingly, your manner of computation of VAT which includes the basic pay, agency fee and consumed supplies, is hereby upheld. We would like to call your attention to 3 points, however: 1. You formerly paid a contractor's tax of 4%. The logical increase in tax therefore should only be 6%. 2. As VAT registered enterprise you are allowed input taxes. You should compute your savings in this matter to be able to charge lower rates and 3. Computation of VAT on a single janitor basis could be misleading. It is your whole operation that should make a report for the purpose. To therefore pass the whole tax to your customers including what you used to pay before and keeping all the benefits is not good business. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner