VAT Ruling No. 001-02

January 7, 2002 VAT RULING NO. 001-02 109 (y), 116 RR No. 2-98 022-2000 J.C. Palabay Enterprises, Inc. 67 Gen. Ordoez Street Marikina Heights, Marikina City Attention: Mr. Jescie L. Palabay Vice-President Gentlemen : This refers to your letter dated July 30, 2001, requesting for a letter/certificate to the effect that your printing, publication and sale of school textbooks to local government units (e.g. municipal, provincial and city governments) be: (a) exempt from value-added tax (VAT); and (b) therefore, not subject to the withholding of creditable VAT under Revenue Regulations No. 2-98. In reply, please be informed that VAT Review Committee Ruling No. 022-2000 dated June 23, 2000, states that: "Under Section 109(y) of the Tax Code of 1997, sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin, which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements, is exempt from the imposition of the VAT. As such, regardless of the amount of said transaction, it will not be subjected to the VAT. Neither will it be subjected to the 3% percentage tax under Section 116, in relation to Section 109(z) of the same Code." Therefore, such sale to the government is likewise not subject to the withholding of creditable VAT pursuant to the first paragraph of Sec. 4.114 of Revenue Regulations No. 2-98, as amended. In view thereof, your printing, publication and sale of school textbooks to local government units are exempt from the payment of the VAT and the 3% percentage tax. Neither are they subject to the withholding of creditable VAT under Revenue Regulations No. 2-98. However, in case you issue a VAT invoice or receipt therefor, you shall be liable to the VAT and subject to the withholding of creditable VAT under Revenue Regulations No. 2-98. This ruling is being issued on the basis of the foregoing facts as represented. If upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Service