10% VAT Imposed on Security Services to NAPOCOR

November 15, 1988 BIR RULING NO. 541-88 99 242-88 541-88 Gentlemen : This refers to your letter dated May 18, 1988, stating that you are providing security services to National Power Corporation; that despite your repeated requests to that company to shoulder the 10% value-added tax (VAT), your requests were all denied; and that in fact, said company does not and refuses to pay said 10% tax. On the basis of the foregoing facts, you now request a ruling as to who between you is required and legally bound to pay the 10% VAT. In reply, please be informed that under Section 99 of the Tax Code, as amended by Executive Order No. 273, the persons liable for the payment of the value-added tax are not the buyers/purchasers of services but those performing services for a fee. However, since the value-added tax is an indirect tax, it can be shifted to the customer. Once shifted to the customer as addition to the cost of goods/services sold, it is no longer a tax but an addition to cost which the customer has to pay in order to obtain the goods/services. (Philippine Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967) Accordingly, whether or not, the VAT is passed on to National Power Corporation, the 10% value-added tax on your gross receipts shall be levied, assessed and collected against your security agency. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner