Museo Pambata Foundation, Inc.

July 31, 2009 VAT RULING NO. 010-09 Sec. 015; S30-27-03; DA-043-04 Museo Pambata Foundation, Inc. Roxas Boulevard corner South Drive Manila, Philippines Gentlemen : This refers to your letter dated August 9, 2007 requesting exemption from the value-added tax. acCDSH It is represented that the Museo Pambata Foundation, Inc. (Foundation) is a non-stock, non-profit organization registered with the Securities and Exchange Commission with Registration No. AN093-003387 dated August 2, 1993; that since its inception in 1994, its has been religiously complying with the Bureau of Internal Revenue requirements; that the Philippine Council for NGO Certification has recommended that the Foundation secure a VAT exemption from this Office to cover for possible tax exposure; and that for the last four (4) years, the Foundation has been following up its request for exemption from the VAT from the Revenue District of Manila. In reply, please be informed that Section 105 of the Tax Code of 1997, as amended, provides that 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 the same Code. 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 non-stock, non-profit 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 the instant case, the Philippine Council for NGO Certification has recommended that the Foundation secure a VAT exemption from this Office to cover for possible tax exposure on the VAT. You opine, that as a non-stock, non-profit corporation, you are exempt from the value-added tax. We disagree. The 12% VAT is a tax on the business transaction or activity and is an indirect tax which the seller may pass-on or shift to the customer who ultimately bears or assumes the burden of the tax. The tax passed-on to you its character as a tax but becomes part of your purchase price. Accordingly, the sale of goods or services by a VAT registered and VAT registerable persons to the Foundation is subject to the 12% VAT. In view of the foregoing, goods and services sold to the Foundation by the persons referred above are subject to the value-added tax at the rate of 12% since there is no showing that the Foundation is exempt from indirect taxes. ITADaE Please be guided accordingly. Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner