Zambrano & Gruba

October 29, 2008 VAT RULING NO. 009-08 Sec. 108 (B); VAT Ruling No. 006-2006 Zambrano & Gruba 27th Floor, 88 Corporate Center Sedeo corner Valero Streets Salcedo Village, Makati City Attention: Atty. Angelo Patrick F. Advincula Gentlemen : This refers to your letter dated October 13, 2006 stating that your client, Amdatex (ADEC) Services Corporation (AMDATEX), is a stock corporation duly registered with the Securities and Exchange Commission (SEC) on July 31, 2006; that it is organized for the purpose of engaging in the business of Information Technology (IT); that pursuant to its purpose, the company provides IT enabled services primarily to foreign clients, including but not limited to data encoding, data processing, data conversion, transcription, call-centre and Customer Relationship Management Services, business process outsourcing, systems designs, integration and management, software development, data center management, content development, outsourced billing and billing information services, outsourced marketing services and other services involving IT and business process needs; that one hundred percent (100%) of AMDATEX's services are being provided to customers located outside the Philippines; and such foreign clients are billed in acceptable foreign currency. ISAcHD In connection therewith, you now request for confirmation of your opinion that services rendered by AMDATEX to customers outside the Philippines are subject to value-added tax (VAT) at zero-rate pursuant to Section 108 (B) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337, as implemented by Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005. In reply thereto, please be informed that Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005 provides that "(b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: xxx xxx xxx (2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; cHCSDa xxx xxx xxx" In stressing the rationale of the above-mentioned rule, this Office elucidated the matter in BIR VAT Ruling No. 006-2006 dated May 30, 2006, as follows: ". . . this Office hereby confirms your opinion that E-Way's sale of services is considered automatically zero-rated, it being not one of the effectively zero-rated transactions enumerated under Section 4.102 (c) of Revenue Regulations No. 7-95, and therefore, there is no need to file an application for zero-rating and the status of E-Way as a zero-rated VAT taxpayer commenced from the effectivity of its VAT registration." ETDHSa At this juncture, observation has to be made of the fact that since the nature of business of AMDATEX is similar to the above-cited ruling, its sale of services to foreign clients engaged in business conducted outside the Philippines, the consideration for which is paid for in foreign currency and accounted for in accordance with BSP rules falls within the purview of Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005, as amended by Revenue Regulations No. 4-2007. SUCH BEING THE CASE, this Office holds that the services rendered by AMDATEX to said foreign clients abroad and paid for in foreign currency are subject to VAT at zero percent (0%) rate. SCADIT 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 null and void. Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner