BIR Ruling No. 514-11

December 20, 2011 BIR RULING NO. 514-11 Sections 109 (R) and 116 of the Tax Code of 1997, as amended; 000-00 Eduresources Publishing, Inc. Unit 407, No. 77 Visayas Avenue Quezon City Attention: Mr. Jessie C. Delos Santos Chief Accountant Gentlemen : This refers to your letter dated June 27, 2011 requesting for a ruling that Eduresources Publishing, Inc. (EPI) is exempt from the coverage of 12% VAT and 3% Percentage Tax pursuant to Section 109 (R) of the Tax Code of 1997, as amended. It is represented that EPI is duly registered with the Securities and Exchange Commission on May 6, 2011 with Tax Identification No. 008-036-302-000. It is principally engaged in publishing of textbooks and other educational materials distributed primarily to the Department of Education. It was issued by the National Book Development Board (NBDB) Certificate of Registration No. 1339, valid from June 14, 2011 until April 30, 2014. In reply, please be informed that the exemption of sale, importation, printing or publication of books and other reading material from the coverage of value-added tax is found 4 under Section 109 (R) of the Tax Code of 1997, as amended. The said section states as follows: "SEC. 109. Exempt Transactions. 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; xxx xxx xxx" (emphasis supplied) Based on the above cited provision of law, the publication of textbooks and other educational materials is exempt from the coverage of value-added tax. With regard to exemption from the percentage tax of three percent (3%), Section 116 of the Tax Code of 1997, as amended, provides: CaAIES "SEC. 116. Tax on Persons Exempt from Value-Added Tax (VAT). Any person whose sales or receipts are exempt under Section 109 (V) of this Code from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales of receipts: Provided, That cooperatives shall be exempt from the three percent (3%) gross receipts tax herein imposed." The aforementioned provision of law specifies the entities that are exempt from value-added tax but are covered by percentage taxes. As clearly stated in the law, non-VAT registered entities exempt under Section 109 (1) (V) of the Tax Code of 1997, as amended, are covered by percentage taxes. By implication, entities covered by Section 109 (A) to (U) are also exempt from percentage taxes. Furthermore, it was held in VAT Ruling No. 011-08 dated November 17, 2008, that: "In VAT Ruling No. 037-2001 dated June 13, 2001, this Office had the occasion to rule that the 3% percentage tax prescribed under Section 116 of the Tax Code of 1997 does not apply to transactions exempt from the 10% (now 12%) VAT listed in Section 109 (A) to (U) of the same Code as it applies only to transactions falling under item (V) of the said section. However, if you have other transactions (such as printing of brochures) which are subject to the VAT and your gross annual sales and/or receipts exceed the amount of P1,500,000.00, you will be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions (Revenue Memorandum Circular No. 62-2005)." In view of the foregoing, this Office hereby confirms that publication of textbook is exempt from the 12% value-added tax and three percent (3%) percentage tax. 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. EaCSHI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue