VAT Ruling No. 009-92

January 23, 1992 VAT RULING NO. 009-92 NIRC Sec. 102 (a) Precedent Ruling 000-00 The House of Racor Ads, Incorporated 101 E. De los Santos Avenue Makati, Metro Manila Attention: Mr. David B. Dedel Vice-President Gentlemen : This refers to your letter dated March 3, 1990 stating that you are a domestic corporation and a registered VAT taxpayer engaged in outdoor advertising business, that your activities consist principally of installing and maintaining neon signs, store front signs, animated and revolving plastic signs and interior illuminations; that you fabricate, install and maintain at your own expense advertising signs in accordance with the design and specifications furnished by your clients; that you have a client who engaged your services to fabricate, install and maintain neon signs which are presently erected on their land and building; that under your Lease Contract with said client, they will pay you a fixed monthly rental for a period of two years renewable at their option; said contract also stipulates that the VAT on the monthly payments to you will be assumed by your clients; that you believe that the monthly payment you receive from your client is subject to VAT because it is the consideration for the service you rendered to said client; that contrary to the expressed term of the contract, your client refused to pay the VAT alleging that their payments to you are rentals which are exempt from VAT. Based on the foregoing, you pose the query whether or not payments to you are subject to VAT. In reply, please be informed that pursuant to Section 102(a) of the Tax Code, a value-added tax of 10% is levied, assessed and collected based on the gross receipts derived by any person engaged in the sale of services. In the instant case, you are the person selling services to your client and the services you render i.e. installing and maintaining neon signs, store front signs, animated and revolving plastic signs and interior illuminations; fabricating, installing and maintaining at your own expense advertising signs in accordance with the design and specifications furnished by your client, are clearly subject to 10% VAT under the adverted provision of the Tax Code and you are the one liable to VAT under the facts/arrangements presented. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue