VAT Ruling No. 001-06

February 14, 2006 VAT RULING NO. 001-06 R.R. No. 16-2005 Sec. 108 Viejas Technology Center Corporation Unit 2012 Jollibee Plaza Bldg. Emerald Avenue Ortigas Center, Pasig City Attention: Mr. Leandro Lee P. Uyguanco Chief Operating Officer Gentlemen : This refers to your letter dated October 6, 2005 requesting for a ruling exempting you from paying the value-added tax. It is represented that your company, which is operating call handling activities for the U.S.A. and U.K. customers, was organized on September 9, 2005; and that your services will be paid for in foreign currencies. Your certificate of registration, however, reveals that you are a VAT-registered taxpayer. 07taxcda In reply, please be informed that Section 4.108-5 of Rev. Regulations No. 16-2005, implementing Sec. 108 of the Tax Code of 1997, as last amended by R.A. No. 9337 provides as follows: "SEC. 4.108-5. Zero-Rated Sale of Services. "xxx xxx xxx (b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero-percent (0%) VAT rate: "xxx xxx xxx (2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; "xxx xxx xxx" Accordingly, your call handling activities for the U.S.A. and U.K. customers being paid for in foreign currencies is not considered as exempt from VAT but shall be subject to the zero percent (0%) rate. As regards income derived for services you may be rendering to resident clients even if the same is to be paid for in foreign currency shall be subject to the 10% VAT. (VAT Ruling No. 14-2002) HSCATc This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue