BIR Ruling No. 475-13

December 18, 2013 BIR RULING NO. 475-13 Section 109 (1) (R) of the Tax Code of 1997; BIR Ruling No. 018-12 Saint Mary's Publishing Corp. 3rd Flr. SMPC Bldg., 1308 P. Guevarra Cor. 1747 E. Remigio St., Sta. Cruz, Manila Attention: Marites M. Mansit Accounting Supervisor Gentlemen : This refers to your letter dated May 18, 2012, requesting Value Added Tax exemption on the sale of books for every transaction to any government entities. It is represented that SAINT MARY'S PUBLISHING CORPORATION with Taxpayer Identification No. 003-945-280-000, is a stock corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. AS094-008463; that it is registered with the National Book Development Board with Reg. No. 2011-0013 in accordance with the provisions of R.A. 8047, the Book Publishing Industry Development Act. In reply, please be informed that Section 109 (1) (R) of the Tax Code of 1997 as amended by Republic Act No. 9337 provides, viz. : "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 (R) Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements;" HCaIDS The Supreme Court in CIR vs. Toshiba Information Equipment (Phils.), Inc., G.R. No. 150154, August 9, 2005 defined an exempt transaction as one that involves goods or services which, by nature, are specifically listed in and expressly exempted from the VAT, under the Tax Code, without regard to the tax status of the party to the transaction. Accordingly, and since SAINT MARY'S PUBLISHING CORPORATION is engaged in the publishing and sale of books, it is therefore exempt from the payment of VAT. However, as stated in its Articles of Incorporation, SAINT MARY'S PUBLISHING CORPORATION has other transactions (such as the printing of brochures, bookbinders, paper makers, stationers, etc.) which are subject to VAT. Thus, it is required to register as a VAT business entity and issue separate VAT invoices/receipts to record such transactions. (BIR Ruling No. 018-2012 dated January 11, 2012) In view thereof, SAINT MARY'S PUBLISHING CORPORATION's sale, printing and publication of pre-school, elementary and secondary level textbooks, for both private and government institutions or books and any newspaper, magazine, review or bulletin which appear at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements is exempt from the payment of the VAT and consequently, from the coverage of the final VAT on its contracts with government schools as required under Section 4.114 of Revenue Regulations No. 2-98, as amended, as well as from the 3% percentage tax under Section 116, in relation to Section 109 (1) (V) of the Tax Code of 1997, as amended. (BIR Ruling No. 007-11 dated January 19, 2011) Moreover, VAT is an indirect tax payable by the seller and not the purchaser of goods; 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. Hence, the shifting of the VAT to SAINT MARY'S PUBLISHING CORPORATION does not make it a person directly liable therefore, SAINT MARY'S PUBLISHING CORPORATION cannot invoke its tax exemption privilege under Section 109 (1) (R) of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. Hence, notwithstanding that SAINT MARY'S PUBLISHING CORPORATION is a publication company, its purchases of goods, properties or services from its suppliers shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the same Code. (BIR Ruling 224-12 dated April 10, 2012) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. TICAcD Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue