BIR Ruling [UN-181-94]

June 22, 1994 BIR RULING [UN-181-94] EEI Corporation - J.E. Manalo & Co., Inc. Joint Venture No. 12 Manggahan St., Bgy. Bagumbayan Libis, Quezon City Attention: Mr . C . D . Galang Project Accountant Gentlemen : This refers to your letter dated June 1, 1994, stating that corporation and J.E. Manalo & Co., Inc., a joint venture and Vat-registered company, entered into a contract with the Department of Transportation Communication (DOTC) on April 20, 1993 for the construction of Davao Fishing Port Complex under the Fishing Port Development Project II; that DOTC deducts and withholds from its money payment to you the corresponding 6% withholding value-added tax based on the gross accomplishment without deducting the recoupment and retention portion; that you have informed DOTC about BIR Ruling No. 422-93 dated October 23, 1993 but the latter replied that the applicable provision is Revenue Regulations No. 10-93 and not the adverted BIR Ruling; hence, this request for clarification. In reply, please be informed that BIR Ruling No. 422-93 is applicable on your contract with DOTC in view of the similarity of facts and legal issues involved therein. Accordingly and in line with the dispositive portion of said ruling, the recoupment portion of the gross accomplishment which represents the advance payments received by you from DOTC is not subject to the 6% withholding value-added tax considering that you have already paid the 10% VAT thereon at the time of the receipt of the advance payment. Moreover, the 10% retention which will be paid by DOTC upon completion of the project is not subject to the 6% withholding value-added tax since the same is a receivable and, hence, not includible in the term "gross receipts", pursuant to VAT Ruling No. 118-92 dated December 1, 1992. (BIR Ruling No. 422-93 dated October 25, 1993). Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service)