Friends for Cultural Concerns of the Philippines

April 22, 2009 VAT RULING NO. 007-09 Sec. 105 Friends for Cultural Concerns of the Philippines Room 810 Vicente Madrigal Bldg. 6793 Ayala Avenue, Quezon City Attention: Ms. Amelia R. Ablaza President Gentlemen : This refers to your letter requesting that the Friends for Cultural Concerns of the Philippines (FCCP) be given a certificate of exemption from the payment of the value-added tax (VAT). CIaHDc It is represented that the FCCP is a non-stock, non-profit corporation organized for the purpose of promoting arts and culture; that it also gives financial support, grants, sponsorship, donations and other forms of financial aid out of the funds of the corporation for the purpose of enhancing and advancing the purposes for which the corporation is organized; that the sources of its funds comes from dues and contributions of its members, generous donors and others involved in its various cultural activities; that a grant of VAT exemption will enable it to assist more artists efficiently and effectively and thus, help towards the realization of its goal to promote our own indigenous culture. Based on the foregoing, you are requesting exemption from the payment of the VAT on your purchases of goods and/or services. In reply, this Office regrets to inform you that your request cannot be granted for lack of legal basis. Section 105 of the Tax Code of 1997, as amended, provides as follows: "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. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716. The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity." In view thereof, although FCCP is a non-stock non-profit private organization, it shall be subject to VAT if it is engaged in the regular conduct or pursuit of a commercial or economic activity irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests. Furthermore, its purchases of goods, properties or services (as well as its importation of goods) shall nevertheless be subject to the 12% VAT, if the seller/supplier is a VAT-registered or VAT-registerable person, pursuant to Sections 106, 107 & 108 of the Tax Code, as last amended by R.A. 9361 (VAT Ruling No. 119-90 dated May 14, 1990 and BIR Ruling No. DA-043-2004 dated February 4, 2004) 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 as null and void. TIcEDC Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner