Tax Base in Computing VAT on the Sale of Services

July 28, 1988 BIR RULING NO. 363-88 102 (a) (3) 061-88 363-88 Gentlemen : This refers to your letter dated February 2, 1988 stating that you have already registered your business as a VAT entity engaged in the sale of services; that your sales of services consist in the supply of manpower services to various clients; and that for such services you bill the client as follows: Salary per day P64.00 13th month pay 5.33 Sub-Total P69.33 Agency fee at 15% 10.40 SSS and Medicare 3.79 Leave with pay 1.06 Gross receipts P84.58 VAT (10%) 8.45 TOTAL PER DAY P93.03 ====== On the basis of the foregoing facts, you now request for a ruling as to whether the 10% VAT should be based on the agency fees or on the gross receipts. aisadc In reply, please be informed that the tax base in computing the value-added tax on the sale of services is gross receipts which means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments, actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding the value-added tax pursuant to Section 2(m) of Revenue Regulations No. 5-87 implementing Section 102(a)(3) of the Tax Code as amended by E.O. No. 273. Accordingly, in the foregoing illustration the value-added tax should be based on P84.58 which represents the gross payments per day made by your client. (BIR Ruling No. 061-88 dated February 29, 1988) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner