BIR Ruling No. 215-15

June 19, 2015 BIR RULING NO. 215-15 Sec. 109 (1) (R) of the Tax Code of 1997, as amended; BIR Ruling No. 255-2012; BIR Ruling No. 007-2011 MKG Publishing 174 San Miguel Homes, Pasolo Valenzuela City Attention: Ms. Ma. Katrina C. Del Castillo Managing Director Gentlemen : This refers to your letter dated August 27, 2013 requesting for a VAT exemption certificate pursuant to the provisions of Section 109 (1) (R) of the Tax Code of 1997, as amended. It is represented that MKG PUBLISHING with Taxpayer's Identification No. 434-264-094-000, is a sole proprietorship business owned by Ma. Katrina Constantino del Castillo with business address at 174 San Miguel Homes, Pasolo Homes, Valenzuela City; that it is registered with the Department of Trade and Industry (DTI) under Certificate of Registration No. 02013445 dated March 21, 2013; and that MKG PUBLISHING is registered with the National Book Development Board (NBDB) as a Book Publisher per NBDB Registration No. 1639. 1 In reply, please be informed that Section 109 (1) (R) of the 1997 Tax Code, as amended, the " sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin, which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements is exempt from the imposition of the VAT :" The above provision is being implemented by Revenue Regulations (RR) No. 16-2005. Section 4.109-1 (B) (r) thereof, provides that "(r) Sale, importation, printing or publication of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; " shall be exempt from VAT. Prescinding from the above-cited provisions, it is clear that there are four (4) activities that are exempt from the coverage of VAT, i.e. , sale, importation, printing and publication of books, newspapers, magazines, reviews and bulletins. Moreover, the features of the said items, like magazine should appear at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements. (BIR Ruling No. 255-12 dated April 20, 2012) In view thereof, your business of publication and sale of books is exempt from the payment of VAT/creditable VAT and from the 3% percentage tax. However, if you have other transactions (such as the printing of brochures, bookbinding, engraving, stereotyping, electrotyping, lithographing of various reference books, trade books, journals and other literary works), which are subject to the VAT, you will also be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions. (BIR Ruling No. 007-2011 dated January 11, 2011) Moreover, VAT is an indirect tax payable by the seller and not the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to MKG PUBLISHING does not make it the person directly liable and therefore, it cannot invoke its tax exemption privilege under Section 109 (1) (R) of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. Hence, notwithstanding that MKG PUBLISHING is a publication and printing company, its purchases of goods, properties or services from its suppliers shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the same Code. However, with regard to the sale and publication of electronically printed materials or digital/computerized versions, including but not limited to: e-books, e journals, electronic copies, online library sources, CDs and software, this Office had clarified in Revenue Memorandum Circular (RMC) No. 75-2012 2 dated November 22, 2012, that the terms "book", "newspaper", "magazine", "review" and "bulletin" for purposes of the VAT law only applies to printed materials in hard copies. It does not, however, apply to electronic copy of any book or publication. 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. cSEDTC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. 2. NIRC of 1997 as amended, on the VAT exemption of the sale, importation, printing or publication of books, newspapers, magazines, reviews or bulletins.