Taxability of Travel Agents and Travel Agent Service Exporters to the Value-Added Tax

February 15, 1988 REVENUE MEMORANDUM CIRCULAR NO. 07-88 SUBJECT : Taxability of Travel Agents and Travel Agent Service Exporters to the Value-Added Tax TO : All Internal Revenue Officers and Others Concerned 1. A travel agent is required to pay a 10% VAT on its receipts which purposes of this tax will not include the price of airline or ship tickets or the reimbursement of expenses which shall be limited to passport and visa fees for all types of passengers and hotel room charges, bus and/or car tour charges, guide fees, resort fees and meal charges for tourists provided that all the said expenses are properly supported by receipts issued by the supplying company or establishment. All other income or receipt shall pay the VAT of 10%. 2. In determining the amount of gross receipts every travel agent is allowed and shall prove when required that the expenses or fees or fares mentioned under paragraph one hereof was in fact meant for a third party other than the travel agent and paid to such party. 3. In the case of tickets sold to travel agents on a net basis the tax shall be based on the margin between the selling price to the customer and the net purchase price provided that where such margin exceeds 9% of the gross selling price of the ticket to passenger then the whole transaction shall be considered a resale and the 10% VAT shall be imposed on the gross selling price. 4. Travel agent service exporters and these are defined as those travel agents who furnish tour package arrangements for foreign tourists paid for in acceptable foreign currency which has been surrendered to the Central Bank thru the banking system in the Philippines shall be considered as a 0 rated transaction under Subsection (2), Sec. 102 of E.O. 273. 5. The sale of tickets to any person which is paid for in an acceptable foreign currency and surrendered to the Central Bank thru the banking system in the Philippines shall be considered a 0 rated transaction under Subsection (2), Section 101 of E.O. 273. 6. Where tour services are packaged and sold to domestic tourist the VAT of 10% shall be collected on the total receipts of the tour operator not including the fees paid to bus operators, resort and guide fees and meal expenses that are properly receipted for. cd i 7. In case the passenger or customer of a VAT registered travel agent is also a VAT registered person and requires the issuance of a receipt to apply as an input tax payment of VAT for the services of the travel agent, the travel agent is required to issue a receipt segregating the amount paid as VAT otherwise such a receipt will not be valid for purposes of input tax credits. It is desired that this Circular be given as wide a publicity as possible. (SGD.) BIENVENIDO A. TAN, JR. Commissioner