BIR Ruling No. 244-12

April 10, 2012 BIR RULING NO. 244-12 Sec. 109 (R) NIRC; BIR Ruling No. 007-2011; BIR Ruling No. 340-2011 St. Matthew's Publishing Corporation 744 Baltazar St., Cristi Compound Guitnang Bayan 1 San Mateo, Rizal Attention: Raymund S. Catabijan President Gentlemen : This refers to your letter dated May 4, 2011 requesting for certificate of exemption from value-added tax (VAT) pursuant to the provisions of Section 109 (R) of the Tax Code of 1997, as amended. Documents submitted show that St. Matthew's Publishing Corporation , with Taxpayer Identification No. (TIN) 007-283-001-001, is a domestic corporation duly registered with the Securities and Exchange Commission (SEC), bearing SEC Registration No. CS200905620, dated April 21, 2009; and that the purposes, among others, for which it was formed are to engage in the business of publishing, printing, distributing and selling of printed and electronic materials, including, but not limited to, instructional materials, textbooks, journals, magazines, periodicals, catalogues, pamphlets, reports, manuals; to engage in the business of publishing e-books, internet-based books, and other instructional materials in electronic media, and to obtain, purchase or otherwise acquire copyrights, trademarks, patents, inventions, and formula. In reply, please be informed that Section 109 (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." ATDHSC 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. In view thereof, St. Matthew's Publishing Corporation's sale and publication of books printed in hard copy are exempt from the payment of VAT and from the 3% percentage tax under Section 116, in relation to Section 109 (V) of the 1997 Tax Code. ( BIR Ruling No. 007-11 dated January 19, 2011 ) However, with regard to the sale and publication of its electronically printed materials, such as electronic books, this Office had the occasion to rule in BIR Ruling No. 340-2011 dated September 7, 2011, that the term "book" for purposes of the VAT law only applies to printed matters in hard copy. It does not, however, apply to electronic copy of any book or publication, thus: "CD-ROM comes within the purview of the "goods or properties", hence, the sale thereof made in the course of trade or business of the seller is subject to VAT pursuant to Section 99 in relation to Section 100 of the aforesaid NIRC. An electronic copy of any publication does not come within the purview of the terms "books, newspapers, periodicals, magazine, review or bulletin" for the purpose of VAT exemption as provided under Section 103(y) of the aforesaid NIRC. The said terms only apply to printed matters in hard copy as expressly provided therein. The term "book" has been defined as "A literary composition which is printed; a printed composition bound in volume." (Scoville V Toland 21 Fed. Cas. 864 BLACK'S LAW DICTIONARY) Accordingly, it does not come within the purview of the VAT exemption provided under Section 109 (y), NIRC, as amended by RA No. 8241, and as renumbered by R.A. No. 8424 (now Sec. 109 (R) of the 1997 Tax Code), as follows: (y) 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." In view of the foregoing, St. Matthew's Publishing Corporation's sale and publication of its electronic copies of books and other instructional materials, being outside the purview of the term "books or any similar publication" for purposes of Section 109 (R) of the 1997 Tax Code, are subject to the 12% VAT. Thus, it is required to register its business as a VAT business entity and issue a separate VAT invoice/receipt therefor to record such transactions. CcaDHT 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 as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue