VAT Ruling No. 005-89

January 6, 1989 VAT RULING NO. 005-89 Mr. Hernan F. Consunji H.F. Consunji & Associates 53 Baler Street, Quezon City S i r : This refers to your letter dated December 13, 1988 stating that your client is in the service of promoting products by engaging the services of contractual employees and lessors of transportation equipment; that it shoulders the employees' uniforms, promotional materials and other direct and indirect overhead expenses and that it charges an agency service fee (ASF) of 17.5% of total cost and expenses. Based on the foregoing facts, you request clarifications on the following queries: 1. Is the service of promoting products for another subject to the value-added tax? Ans.: Yes and your client as the person performing the services shall be liable to pay the VAT pursuant to section 102 of the Tax Code as amended by E.O. 273 2. What would be the basis of the VAT? Ans.: The VAT shall be based on the gross receipts which is the total amount or total quoted price representing the contract price, compensation or service fee including the amount charged for materials supplied with the services. 3. Should the VAT be based on the total quoted price, will their signed quotation be considered the contract, even if the income of your client is only the ASF? Ans.: Yes, the basis is the total gross receipts. Please be guided accordingly. LLphil Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner