BIR Ruling [UN-161-95]

April 17, 1995 BIR RULING [UN-161-95] The Ambassador Embassy of Pakistan Manila S i r : This refers to your letter dated March 15, 1995, in effect, requesting for a ruling that in connection with your hosting of a reception at Shangrila Hotel, Makati, you are exempt from the caterer's tax which are passed on to you by the Hotel Management. In reply, please be informed that under Republic Act No. 7716, otherwise known as the Expanded VAT Law, proprietors or operators of restaurants or hotels are subject to the value-added tax. However, in view of the temporary restraining order issued by the Supreme Court, suspending the implementation of the Expanded VAT Law, the operators of hotels or restaurants remain subject to the hotel occupancy or caterer's tax, under Sections 113 and 114 of the Tax Code, as amended. Since these are the direct tax liabilities of the hotel or restaurant owners or operators, pursuant to our existing jurisprudence, when these taxes are added to the costs of the service of the hotel and restaurant owners, they are no longer taxes to the purchaser but an additional cost for the service. Accordingly, you cannot invoke the tax exemption privilege under Article 34 of the Vienna Convention. cdta In view of the foregoing, your request is hereby denied for lack of basis. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA. L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)