Tax Liability of Cinematographic Film Owner, Lessor and Distributor

July 18, 1988 BIR RULING NO. 332-88 102 059-88 332-88 Gentlemen : This refers to your letter dated April 20, 1988 requesting a ruling as to whether as a cinematographic film owner, lessor and distributor, your billings covering services completely rendered but which remain unpaid as of December 31, 1987 are subject to the 3% percentage tax imposed by then Section 174 of the Tax Code or the 10% value-added tax. cdtech In reply, please be informed that for VAT purposes, lessors or distributors of cinematographic film as well as contractors subject to 4% tax imposed by then Section 170 of the Tax Code are now considered as engaged in the "sale of services" subject to the 10% VAT. [Sec. 102(a) Tax Code, as amended by Executive Order No. 273] Accordingly, Section 6(g) of Revenue Regulations No. 5-87 implementing the provisions of Executive Order No. 273 which states that amounts due on contracts completed on or before December 31, 1987, payments of which are receivable on or after January 1, 1983, shall be considered as accrued as of December 31, 1987 for purposes of the payment of the contractor's tax of 4% shall apply to cinematographic film owners, lessors and distributors subject to the following conditions stated therein: a) filing of an information return showing the name(s) of the contractee(s) and the amount(s) of the contract price outstanding as of December 31, 1987, and containing a declaration of the obligation to pay the contractor's tax due; b) billing of the unpaid amount not later than December 31, 1987 by the contractor and copy of such billing to be attached to the information return herein required; c) recording of the amount receivable in the books of accounts of the contractor for the year 1987; and d) filing not later than January 20, 1988, and/or before the 20th day after each calendar quarter, of the regular contractor's tax return for the payment of the contractor's tax on payments received in 1988. Failure to comply with the above-stated conditions shall automatically subject the gross receipts to value-added tax at 10%. Accordingly, under the foregoing provision of the regulations, your receivables which have been earned, billed and booked but which remain unpaid as of December 31, 1987 are still subject to the 3% percentage tax provided that the above-stated conditions are complied with; otherwise, said billings shall be subject to VAT. (BIR Ruling No. 059-88) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner