BIR Ruling No. 562-12

September 6, 2012 BIR RULING NO. 562-12 Section 109 (H) of the Tax Code of 1997, as amended; BIR Ruling No. 169-2011; BIR Ruling No. 168-2011; BIR Ruling No. 155-2011 Lourdes School, Inc. Kanlaon Cor. D. Manuel Sts. Sta. Mesa Heights Quezon City Attention: Bro. Rolando O. Donasco, OPM Cap. Treasurer Gentlemen : This refers to your letter dated January 26, 2012 requesting for the exemption of LOURDES SCHOOL, INC. from the payment of Value-Added Tax as it is operating as a non-stock and non-profit educational institution under Section 30 (H) of the Tax Code of 1997, as amended. In reply, please be informed that LOURDES SCHOOL, INC.'s gross receipts from operations as a non-stock, non-profit educational institution are exempt from value-added tax (VAT) pursuant to Section 109 (H) of the Tax Code of 1997, as amended. However, LOURDES SCHOOL, INC.'s other activities involving sale of goods and services not in connection with its primary purposes are subject to the 12% VAT imposed under Sections 106 and 108 of the Tax Code of 1997, as amended, or 3% percentage tax imposed under Section 116 in relation to Section 109 (V) of the same Code if the gross sales or receipts from such sale of goods and services do not exceed One Million Five Hundred Thousand Pesos (P1,500,000.00) 1 which tax payment may legitimately be passed on to buyers of such goods and services. (BIR Ruling No. 169-2011 dated May 25, 2011) . Hence, as long as LOURDES SCHOOL, INC. will not engage in the regular conduct or pursuit of a commercial activity, including transactions incidental thereto, it will remain exempt from VAT. (BIR Ruling No. 168-2011 dated May 25, 2011) Moreover, the tax exemption granted to it as a non-stock, non-profit corporation under Section 30 of the Tax Code of 1997 covers only income taxes for which it is directly liable. It should be noted that VAT is an indirect tax payable by the seller and not by 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 it does not make it the person directly liable and therefore, it cannot invoke its tax exemption privilege under Section 30 of the Tax Code of 1997 to avoid the passing on or shifting of the VAT. (BIR Ruling No. 155-2011 dated May 17, 2011) HIAEaC 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Effective January 1, 2012 pursuant to Revenue Regulations No. 16-2011, as amended by Revenue Regulations No. 3-2012, the threshold amount has been adjusted to Php1,919,500.00.