BIR Ruling No. 209-11

July 1, 2011 BIR RULING NO. 209-11 Sec. 105 NIRC; RMC 2-90; RR 16-05; VAT Ruling No. 245-89; VAT Ruling No. 024-96; BIR Ruling No. DA-053-05; BIR Ruling No. DA-032-06 Department of Health Finance Service Building No. 2, San Lazaro Compound, Sta. Cruz, Manila Attention: Mr. Laureano C. Cruz OIC-Finance Service Gentlemen : This refers to your letter dated August 25, 2010, requesting confirmation that the Department of Health (DOH) is not subject to Value-Added Tax (VAT) as imposed by Section 105 of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337. caCTHI It is represented that your colleagues in the DOH attend seminars and trainings wherein the invitations indicate that a special discount on registration fees may be availed of a participant from a non-VAT registered government agency; and that to your understanding, the DOH is not subject to VAT as it is a government agency. In reply, please be informed that DOH, as a national government agency is a non-VAT registered taxpayer. Section 236 (G) Tax Code of 1997, as amended, enumerates the persons required to register for VAT. Considering that it is the principal health agency in the Philippines belonging to the Executive Branch of the Government, it is not primarily engaged in the sale, barter, exchange, lease of goods or services and hence not required to register as VAT-taxpayer. This does not mean, however, that the DOH is not subject to or exempt from VAT as imposed under Section 105 of the Tax Code of 1997, as amended. What is taxable or exempt under VAT is the transaction. If the transaction is not one of the exemptions enumerated under Sec. 103 1 of the Tax Code, the sale of goods or services is subject to VAT, irrespective of whether the purchaser is government agency or a non-government agency. However, a government agency may claim exemption under a special law or international agreement. (Revenue Memorandum Circular No. 2-90 dated January 9, 1990) From the foregoing, this Office is of the opinion that while DOH may be registered with the BIR as a non-VAT taxpayer, DOH may be liable to the 12% VAT if in the course of trade or business, it sells, barters, exchanges or leases goods or properties, or renders services and import goods. The DOH is likewise not exempt from VAT passed-on by sellers of services such VAT that are included in the cost of seminars/training fees to be paid by DOH participants. 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 Footnotes 1. Now Section 109 of the Tax Code of 1997, as amended.