Rex General Merchandising International Corporation

November 17, 2008 VAT RULING NO. 011-08 Sec. 109 (R), 6-2001; VAT Ruling No. 022-2000 Rex General Merchandising International Corporation Unit 50, Fiesta Carnival Arcade, Araneta Center Cubao, Quezon City Attention: Ms. Purita M. Buhain General Manager, RGMIC Gentlemen : This refers to your undated letter requesting for an exemption from the 3% Creditable Value Added Tax pursuant to the provisions of Section 109 of the Tax Code of 1997, as amended. aCTHDA It is represented that your company REX GENERAL MERCHANDISING INTERNATIONAL CORPORATION (REXGEN) is engaged in the publishing, printing, distribution and sale of textbooks to both national and local government units ( e.g. provincial, municipal and city government); and that in the course of your recent transactions with the different LGU's, they continue to impose VAT, a 1% tax on income, while others impose an expanded tax of 2%, hence, this request. In reply, please be informed that Section 109 (R) [then Section 109 (y)] of the Tax Code of 1997 as amended by Republic Act (RA) No. 9337 provides, viz. : "SEC. 109. Exempt Transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (R) 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 . . .". Accordingly, REXGEN is exempt from the 12% value-added tax on its sale, importation, printing or publication of educational books. ITcCaS Moreover, its sale of books to local government units, whether provincial, city, or municipal, is not subject to the 5% final withholding VAT required under Section 114 (C) of the Tax Code of 1997. In VAT Ruling No. 037-2001 dated June 13, 2001, this Office had the occasion to rule that the 3% percentage tax prescribed under Section 116 of the Tax Code of 1997 does not apply to transactions exempt from the 10% (now 12%) VAT listed in Section 109 (A) to (U) of the same Code as it applies only to transactions falling under item (V) of the said section. However, if you have other transactions (such as printing of brochures) which are subject to the VAT and your gross annual sales and/or receipts exceed the amount of P1,500,000.00, you will be required to register your business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions (Revenue Memorandum Circular No. 62-2005). Moreover, pursuant to Section 2.57.2 (E) (4) (f) of Revenue Regulations (Rev. Regs.) No. 2-98, as amended, a creditable income tax at the rate of 2% shall be withheld on income payments to printers, bookbinders, lithographers and publishers except those principally engaged in the publication or printing of any newspaper, magazine, review or bulletin which appear at regular intervals, with fixed prices for subscription and sale. The tax is computed by multiplying the income payment by 2%, exclusive of the VAT. Likewise, Section 2.57.2 (N) of Rev. Regs. No. 6-2001, as amended, provides that income payments, except any casual or single purchase which is P10,000.00 and below, which are made by a government office, national or local, including government-owned or controlled corporations, on their purchases of goods of local suppliers are subject to the one percent (1%) creditable withholding tax. The tax is also computed by multiplying the income payment by 1%, exclusive of the VAT. cTSDAH 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, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner