BIR Ruling No. 337-12

May 15, 2012 BIR RULING NO. 337-12 Sec. 108 (B) (2) of Republic Act No. 9337; Revenue Regulations No. 16-2005; VAT Ruling No. 004-04; VAT Ruling No. 006-06 Openit Philippines, Inc. 3rd Floor Insular Life Bldg. ML Tagarao St., Lucena City 4301 Attention: Ms. Loida Salumbides Global Accountant Gentlemen : This refers to your letter dated 1 October 2010 requesting for confirmation of your opinion that the sale of services of OPENIT PHILIPPINES, INC. is entitled to the benefit of the zero percent value-added tax (VAT). It is represented that OPENIT PHILIPPINES, INC. is corporation duly organized and existing under Philippine laws with principal office address at 3rd Floor Insular Life Bldg., ML Tagarao St., Lucena City; that the primary purpose of the corporation is to engage in, conduct, and carry on the business of computer software development, maintenance management program, document archiving, and other related information technology solutions; that it is registered with the Bureau of Internal Revenue as a VAT taxpayer under Tax Identification No. 006-981-845-000; that it operates mainly as a support group to foreign offices in Norway and the United States of America by providing services such as the preparation of foreign invoices, accounting and administrative work, customer support, marketing, recruitment of employees, and software development. It is further represented that OPENIT PHILIPPINES, INC. does not generate income from the above-enumerated services; that all its gross remittances, equal to the amount of expenses, are used as basis for the 12% VAT and Income Tax in the returns filed; that it receives foreign currency remittances from its Norway office equivalent to the company's office expenses and disbursements; and that any excess remittances during a given month are carried over to the following month to add to the next month's disbursements. In reply, please be informed that Section 6 of Republic Act No. 9337, as implemented by Section 4.108.5 (b) (2) of Revenue Regulations No. 16-2005, provides: "Sec. 6. Section 108 of the Tax Code, as amended, is hereby further amended to read as follows: A. Rate and Base of Tax. . . . B. Transactions Subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: aDTSHc xxx xxx xxx (2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP." (cited in VAT Ruling No. 006-06 dated May 30, 2006) Accordingly, the software development and support group services which OPENIT PHILIPPINES, INC. renders to its non-resident offices in Norway and the United States of America, which come within the purview of information technology services, and which are being paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP, qualify for VAT zero-rating under Section 108 (B) (2) of the Code. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue