VAT Ruling No. 001-99

January 6, 1999 VAT RULING NO. 001-99 105-12-96-001-99 GR Credit Check Co., Inc. UG3 Cityland 8 98 Sen. Gil Puyat Avenue Makati City Attention: Ms . Virginia de Guzman Gentlemen : This refers to your letter dated November 6, 1998 requesting for a ruling that GR Credit Check Co., Inc. (GRCC), a corporation operated not for profit but solely to provide credit investigation and related services to its affiliate through reimbursement-of-cost basis, is not subject to value-added tax. It is represented that GRCC is a corporation in the process of incorporation with the sole purpose of providing credit investigation services; that on November 5, 1998, GRCC filed its incorporation papers with the Securities and Exchange Commission (SEC) to clearly state its primary purpose of providing credit investigation and related services solely to its affiliates while maintaining its subsistence through reimbursements, to wit: "PRIMARY PURPOSE "(a) To provide credit investigation and related services to its affiliated companies and maintain its subsistence by receiving plain reimbursements of the exact costs and expenses it incurs, such as, salaries, benefits, and allowances to its employees, office rentals, cost of power, water, telephone, communication, travel and transportation and other miscellaneous expenses;" and that it does not derive any profit from its operations. In reply, please be informed that under Section 105 of the Tax Code of 1997, which provides for the coverage of the value-added tax, only "person", who in the course of trade or business, sells, barters, exchanges, leases goods or properties or renders services, and any person, who imports goods, shall be subject to the value-added tax." Accordingly, since GRCC does not sell, barter, exchange, nor lease any good or property and neither does it render any service to its affiliates for profit, the service it renders to its affiliates, i.e., providing security services through reimbursement-of-cost basis, are not subject to the value-added tax. This ruling is being issued on the basis of the facts as represented above. If it is subsequently found out that the facts are different, this ruling shall be considered null and void. (BIR Ruling No. DA389-98 dated August 25, 1998; VAT Ruling No. 12-96 dated June 24, 1996) cdll Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group