VAT Ruling No. 005-96

May 14, 1996 VAT RULING NO. 005-96 Section 102 (A)-000-005 The Heritage Hotel Roxas Blvd. corner EDSA M a n i l a Attention: Ms . Ma . Ruby LI . Cano Director of Finance Gentlemen : This refers to your letter dated February 5, 1996 stating that Heritage Hotel leases its space to PAGCOR for its casino and gaming operations; that PAGCOR avails of the Hotel's room and food beverage services; and that these services are covered by the Expanded VAT Law. You now seek clarification as to whether PAGCOR is exempt from paying VAT for these services. cdta In reply, please be informed that PAGCOR's tax exemption under its charter, P.D. No. 1869, pertinent portions of which provide as follows: "SEC. 13. Exemptions . . . . (1.) Customs duties, taxes and other imposts on importation . All importations of equipment . All importations of equipment, vehicles, automobiles, boats, ships, barges, air craft and such other gambling paraphernalia, including accessories of related facilities, for the sole and exclusive use of the casinos, the proper and efficient management and administration thereof, and such other clubs, recreation or amusement places to be established under and by virtue of this Franchise shall be exempt from the payment of all kinds of customs duties, taxes and other imposts, including all kinds of fees, levies, or charges of any kind or nature, whether National or Local. (2.) Income and other taxes . (a) Franchise Holder; No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local , shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority. (Emphasis supplied) refers only to its direct tax liability. Since VAT is an indirect tax, the amount of tax may be passed on by Heritage Hotel to PAGCOR as part of lease rental or cost of goods and services under Section 99 of the Tax Code, as amended. cdti Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue