Niecer Trading Company, Inc.

August 7, 2008 VAT RULING NO. 007-08 Section 109 (y) Tax Code of 1997; VAT Ruling No. 33-2002, 016-2003 Niecer Trading Company, Inc. #108 Tayug St. Barangay San Perfecto San Juan, Metro Manila Attention: Ms. Cherry B. Sayago President Gentlemen : This refers to your letter dated August 29, 2007 requesting for certification for VAT exemption under Rule VII, Section 3 of R.A. No. 8047 otherwise known as the "Book Publishing Industry Development Act. CASIEa It is represented that your company was awarded by the Department of Education, (DepEd), Pantabangan, Nueva Ecija a contract amounting to One Million Nine Hundred Thousand Nine Hundred Seventy One and 90/100 (Php1,999,971.90) * Pesos for the supply and delivery of textbooks. In reply, please be informed that under Section 100, par. (y) of the Tax Code of 1997, sale, importation, printing or publication of books and any newspaper magazine, review or bulletin, which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements, is exempt from the imposition of the Value Added Tax. As such, regardless of the amount of the said transaction, you will not be subject to the VAT and consequently from the creditable VAT, since the transaction is between you and the DepEd. Neither will you be required to pay the 3% percentage tax under Section 116, in relation to Section 109 (7) of the same Code. CDISAc In VAT Ruling No. 33-2002 citing BIR Ruling No. 59-96 it was held that: In connection therewith, please be informed that pursuant to Section 12 of Republic Act No. 8047, the sale of books, including book publishing and printing as well as its distribution and circulation, shall be exempt from the coverage of the Expanded Value-Added Tax (EVAT) Law. Section 3 (a) and (b) of R.A. No. 8047 provides that the term "book" as defined by the United Nations Educational Scientific and Cultural Organizations (UNESCO) is a printed non-periodical publication of at least forty-eight (48) pages, exclusive of cover pages, published in the country and made available to the public. The term "textbook" shall mean a book which is an exposition of generally accepted principles in one (1) subject, intended primarily as a basis for instruction in a classroom or pupil-book-teacher situation. IcDHaT The word "manual" means a book that is conveniently handled; esp. HANDBOOK. (Meriam Webster's Collegiate Dictionary, tenth edition). Accordingly, the "textbooks and teacher's manuals" covered by BMPI's contract with the Department of Education may legally be treated as "Books" provided they meet the above quoted statutory requirement under Section 3 (a) and (b) of R.A. 8047 and as such, the printing and delivery of the said "textbooks and teacher's manuals" shall be exempt from VAT under the afore-quoted Section 109 (y) of the NIRC. In view thereof, your contract with DepEd for the supply and delivery of the enumerated textbooks is exempt from the payment of the Value Added Tax/Final Withholding Value Added Tax and from the 3% percentage tax. However, if you have other transactions (such as the printing of brochures), which are subject to the Value Added Tax, you will also be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions. EaCSHI This ruling is being issued on the basis of the foregoing facts as represented. If upon investigation, it will be discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner