VAT Ruling No. 005-00

January 27, 2000 VAT RULING NO. 005-00 105, 107 201-90 119-90 005-00 Phil. Society of Ventilating, Airconditioning & Refrigerating Engineers (PSVARE) c/o Mr. Irineo R. Amante #8 C. Virata St., BF Homes Paraaque Attention: Mr . Florencio D . Aga President Gentlemen : This refers to your letter dated December 10, 1999 requesting for exemption from the value-added tax (VAT) as a non-stock, non-profit organization. cdlex Based on records submitted with your aforesaid letter, it appears that PSVARE is a holder of SEC Certificate of Registration No. 122925, dated October 8, 1984; that it is a non-stock and non-profit domestic corporation organized by professional mechanical engineers for the purpose of enhancing the mechanical engineering profession and its practice in the field of heating, ventilating, airconditioning and refrigeration in the Philippines; that, no part of its property, or funds shall inure to the benefit of any member, director, officer, private individual, corporation or association, except as may be necessary to compensate reasonably staff members, or employees for services rendered in furtherance of the purposes of the society; and, that it is maintained by means of membership dues, annual dues and contributions. llcd In reply, please be informed that, under Section 105 of the National Internal Revenue Code of 1997, the 10% VAT is imposed on " Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code . . . ." Accordingly, its aforementioned revenue from "membership dues, annual dues and contributions," not being derived from sale of services or sale of goods made in the course of business but rather in connection with its non-stock non-profit activities, is exempt from the 10% VAT. (see VAT Ruling No. 201-90, dated October 11, 1990 in the case of Association of International Shipping Lines, Inc., in relation to VAT Ruling No. 013-89). However, the above exemption from the 10% VAT does not extend to importation of goods. Hence, notwithstanding that it is a non-stock, non-profit organization, its importation of goods shall nevertheless be subject to the 10% VAT pursuant to Sec. 107 of the said Code. Thus, it has been ruled in the case of The Camillian Fathers, Inc. that ". . . if your client imports goods, the said importation shall be subject to VAT. . . . " (VAT Ruling No. 119-90, dated May 14, 1990). Moreover, "If it engages in the sale of goods or services in the course of a business pursuit, in general, it shall also be liable to VAT. . . . " (ibid.) Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group