BIR Ruling No. 403-13

November 7, 2013 BIR RULING NO. 403-13 Sec. 109 (1) (H) of the Tax Code, as amended; 000-00 Sapphire Aviation Support System, Inc. 8128 Old Sucat Road, Brgy. San Dionisio Paraaque City Attention: Catherine R. Levanza Gentlemen : This refers to your letter dated July 18, 2012 requesting for a ruling that your company is exempt from the payment of value-added tax (VAT) as TESDA-accredited private institution providing educational services. Documents submitted disclosed that Sapphire Aviation Support System, Inc. doing business under the name & style of Sapphire International Aviation Academy (formerly: Sapphire Aviation Support System, Inc.) with Taxpayer's Identification No. 410-333-282-000, is a domestic corporation registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200513937; that it is engaged in the business of aviation and other activities related to aviation: operate and provide quality education, training and services in aviation, aeronautics and aerospace technology, including but not limited to private pilot, commercial pilot and pilot licensure courses, basic ground courses, flight instruction, basic and advanced aircraft maintenance technology, basic and advanced avionics technical courses, aerospace engineering, airline administration and operation and cabin training; and that it is recognized by the Technical Education and Skills Development Authority (TESDA) as an Accredited Competency Assessment Center for the following courses: TASCDI Date Expiration Accredited Date Accreditation No.:AC- Front Office Services NC II 3-15-13 3-15-15 FOS0213101315118 Accreditation No.:AC- Food and Beverage Services 3-20-13 3-20-15 PBS0213101315119 NC II Accreditation No.:AC- Housekeeping NC II 3-15-13 3-15-15 HSK0213101315117 Accreditation No.:AC- Bartending NC II 3-15-13 3-15-15 BAR0213101315116 Accreditation No.:AC- Security Services NC II 3-20-13 3-20-15 SES0213101315120 In reply please be informed that Sec. 109 (1) (H) of the National Internal Revenue Code of 1997 (NIRC), as amended states: "SEC. 109. Exempt Transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax. xxx xxx xxx (H)Educational services rendered by private educational institutions, duly accredited by the Department of Education (DepEd),the Commission on Higher Education (CHED),the Technical Education and Skills Development Authority (TESDA) and those rendered by government educational institutions." Thus, under the NIRC, as amended, TESDA recognized or accredited institutions are exempt from VAT pursuant to Section 109 (H) thereof. cDTCIA In view of the foregoing, Sapphire Aviation Support System, Inc.,a TESDA recognized or accredited institution is exempt from VAT on its educational services certified by TESDA as programs for Front Office Services NC II, Food and Beverage Services NC II, Housekeeping NC II, Bartending NC II and Security Services NC II. It is understood that the exemption from VAT does not include other programs or services offered not covered by the authority/accreditation granted by TESDA, which may be subject to VAT under Sec. 108 of the Tax Code of 1997, as amended. Moreover, VAT is an indirect tax payable by the seller and not the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to Sapphire Aviation Support System, Inc. does not make it the person directly liable and therefore, Sapphire Aviation Support System, Inc. cannot invoke its tax exemption privilege under Section 109 (1) (H) of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. Hence, notwithstanding that Sapphire Aviation Support System, Inc. is a TESDA recognized or accredited institution, its purchases of goods, properties or services from its VAT-registered suppliers shall nevertheless be subject to the 12% VAT pursuant to Sections 106 to 108 of the same Code. HAaDcS 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 as represented are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue