BIR Ruling No. 306-14

July 28, 2014 BIR RULING NO. 306-14 Secs. 105, 107, 110, NIRC of 1997, as amended; BIR Ruling No. 006-07; BIR Ruling No. 503-11 I-Remit, Inc. 26/F Discovery Centre, 25 ADB Avenue, Ortigas Center, Pasig City Attention: Ms. Analie M. Angeles Comptroller Gentlemen : This refers to your letter dated April 24, 2012 requesting exemption from paying input value-added tax (VAT) on your purchases from your suppliers this year and onwards. It is represented that I-REMIT, INC., with Taxpayer Identification No. 210-407-466-000, is a domestic corporation duly organized and existing in the Philippines and is engaged in global money remittance business with overseas Filipino workers as the principal remitters; and that I-REMIT, INC. is classified as VAT zero-rated per its BIR Certificate of Registration. In reply, please be informed that there is no legal basis to exempt I-REMIT, INC. from the imposition of input VAT. Section 110 of the Tax Code of 1997, as amended, defines "input tax" as follows: "The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. . . ." CIAHDT Although I-REMIT, INC. was classified in its BIR registration as VAT zero-rated, it only means that its sales of services qualified under Section 108 (B) (2) of the Tax Code of 1997, as amended, are qualified for zero-rating. However, when it purchases goods or properties or services or imports goods, such purchases shall be subject to the 12% VAT pursuant to Sections 105, 106, 107 and 108 of the said Tax Code. Section 105 of the Tax Code of 1997, as amended, states that: "Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value added tax (VAT) imposed in Sections 106 to 108 of this Code. The value added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services ; . . ." It should be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. (BIR Ruling No. 503-11 dated December 15, 2011) But being an indirect tax, VAT can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. (BIR Ruling No. 006-07 dated March 7, 2007; BIR Ruling No. 503-11 dated December 15, 2011) Thus, notwithstanding the classification of I-REMIT, INC.'s sales as zero-rated, it is not exempt from input VAT passed on or shifted by I-REMIT, INC.'s suppliers on its local purchases. Since there is no showing that I-REMIT, INC. is exempt from indirect tax under the existing laws, its purchases of goods, properties or services from VAT-registered entities are subject to 12% VAT, which shall then be passed on to it as an indirect tax and shall form part of the invoice price thereof. DaACIH Because taxes are the lifeblood of the nation, the court has always applied the doctrine of strict interpretation in construing tax exemptions. A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. (Paseo Realty & Development Corporation v. Court of Appeals, et al., G.R. No. 119286, October 13, 2004, as cited in Davao Oriental Electric Cooperative, Inc. vs. The Province of Davao Oriental, G.R. No. 170901, January 20, 2009) The foregoing premises considered, your request for exemption from payment of input VAT is denied for lack of legal basis. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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