Effect of the Shifting of VAT

July 6, 1988 BIR RULING NO. 297-88 102 (a) 000-00 297-88 Gentlemen : This refers to your letter dated February 10, 1988 requesting clarification on the following: "CENTURION" a local security agency charged us 10% above the total salaries we pay to three guards we hired from them. Before the VAT, we pay them the amount of Four Thousand Eight Hundred Ninety only (P4,890) each month). After the VAT we are ask (sic) to pay them the amount of Five Thousand Three Hundred Seventy Nine (P5,379). A difference of Four Hundred Eighty Nine Pesos as VAT. Is this the appropriate way of implementing the VAT?" In reply, please be informed that under Section 99 of Tax Code, as amended by Executive Order No. 273, the person liable for the value-added tax are not the buyers/purchasers but the sellers/importers of goods and those performing services for a fee. However, since the value-added tax is an indirect tax, it can be shifted to the customers. Once shifted to the customer as addition to the cost of goods/services sold, it is no longer a tax but an additional cost which the customer has to pay in order to obtain the goods/services. (Philippine Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967) The shifting of the value-added tax to you does not make you the person directly liable therefore; hence, in the case of Centurion's computation, the additional amount of P489.00 representing the 10% VAT forms part of the gross price fee for security services rendered to that school. For further information and guidance, we are enclosing herewith Revenue Regulations No. 5-87 and Primer on the Value-Added Tax Law. aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner