Customer's Deposit Received Prior to the Implementation of VAT

September 15, 1988 BIR RULING NO. 451-88 102 332-88 451-88 Gentlemen : This refers to your letter dated July 20, 1988 stating that before the effectivity of the VAT, your client, a commercial printer, had a job order where it received a customer's deposit representing a fraction of the total contract price. Consequently, you request for a ruling whether said customer's deposit is considered "gross receipt" under then Section 170 of the Tax Code; or whether the same is likewise considered "gross receipts" as defined under Section 2(m) of Revenue Regulations No. 5-87 implementing the value-added tax law. cdt In reply, please be informed that customer's deposit received by you prior to the implementation of the VAT forms part of the "gross receipts" which is subject to contractor's tax under then Section 170 of the Tax Code. After the effectivity of the VAT, customer's deposit shall likewise form part of gross receipts (subject to VAT) as defined in Section 102(3) of the Tax Code, as amended by Executive Order No. 273, and Section 2(m) of Revenue Regulations No. 5-87, implementing said Executive Order. Customer's deposit representing part payment of contract completed on or before December 31, 1987, payments of which are receivable on or after January 1, 1988, shall be considered as owed as of December 31, 1987 for the purpose of the payment of the contractor's tax subject to the following conditions: 1. An information return shall be filed showing the name of the contractor and the amount of the contract price outstanding as of December 31, 1987; 2. The contractor filed the unpaid amount not later than December 31, 1987; 3. The contractor has recorded in his books of accounts for the year 1987 the amount receivable; and 4. The contractor files not later than January 20, 1988, and on or before the 20th day after each calendar quarter, the regular contractor's tax return for the payment of contractor's tax return for the payment of contractor's tax on payments received in 1988 (Section 6(g)(3), Revenue Regulations No. 5-87) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner