World Vision International

June 22, 2010 VAT RULING NO. 004-10 RA 16-2005; RA 8756 World Vision International Asia-Pacific Region Disaster Management Office Units 1504-1505, Antel Global Corporate Center Julia Vargas Avenue, Ortigas Center, Pasig City Attention: Mr. Edgar E. Esguerra Business Operations Manager Gentlemen : This refers to your letter dated January 31, 2007 requesting exemption from the payment of the Value-Added Tax. IaHDcT It is represented that World Vision is a multinational company, organized and existing under the laws of California, SA and authorized to establish and operate a Regional Headquarters in the Philippines and issued SEC Certificate of Registration and License No. FM-233 dated September 3, 1979 under Presidential Decree No. 218, as amended (now Book III of Executive Order No. 226, otherwise known as the Omnibus Investments Code; and that Part IV-E, Section 14 of the Rules and Regulations Implementing Republic Act No. 8756 Amending Books III and IV of EO 226 provides that regional or area headquarters shall be exempted from the value-added tax and the sale or lease of goods and property and the rendition of services to regional or area headquarters shall be subject to zero percent (0%) VAT rate as provided for in the National Internal Revenue Code, as amended. In reply, please be informed that Section 14 of the Rules and Regulations Implementing Republic Act No. 8756 amending Books III & IV of Executive Order No. 226, otherwise known as the Omnibus Investments Code, as amended provides, viz. : "Section 14. Value-Added Tax. Regional or area headquarters shall be exempted from the value-added tax. The sale or lease of goods and property and the rendition of services to regional or area headquarters shall be subject to zero percent (0%) VAT rate as provided for in the National Internal Revenue Code, as amended. The regional or area headquarters shall not be required to obtain or secure a prior permit from the Bureau of Internal Revenue for Zero-Rating of the supplier's sale of goods and services to them. In general, the regional operating headquarters shall be subject to the ten percent (10%) value-added tax (now 12%) unless otherwise provided under the National Internal Revenue Code, as amended or other existing laws." In addition, Sections 4.108-5 (b) (3) and 4.109-1 (B) (1) (j) of Revenue Regulations No. 16-2005 provides, viz. : "Section 4.108-5. Zero-Rated Sales of Services. "(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 (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rates;" cHCIDE "Sec. 4.109-1. VAT-Exempt Transaction. xxx xxx xxx "(B) Exempt transactions xxx xxx xxx (j) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia Pacific Region and do not earn or derive income from the Philippines. Based on the foregoing, the sale or lease of goods and property and the rendition of services to regional or area headquarters shall be subject to zero percent (0%) VAT rate as provided for under Section 4.108-5 (b) (3) of Revenue Regulations No. 16-2005 and pursuant to Section 14 of the Rules and Regulations Implementing Republic Act No. 8756 amending Books III & IV of Executive Order No. 226, otherwise known as the Omnibus Investments Code, as amended. Moreover, services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia Pacific Region and do not earn or derive income from the Philippines shall be exempt from the value-added tax. This ruling is being issued on the basis of the foregoing facts as represented. However, 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.) GREGORIO V. CABANTAC Deputy Commissioner