VAT Ruling No. 013-98

May 12, 1998 VAT RULING NO. 013-98 Sec. 105-000-013-98 The National Museum Department of Education, Culture And Sports P. Burgos St., Manila Attention: Hon . Gabriel S . Casal Director IV Gentlemen : This refers to your letter dated April 28, 1998 requesting this Office for exemption from the payment of the 10% VAT being charged by Aboitiz Haulers, Inc. to the National Museum for the rental of space for your San Diego Artifacts while the Old Finance Building, the permanent house of the treasures of the National Museum, is under renovation. In support thereof, you cited Section 25 of Republic Act No. 8492 entitled, "An Act Establishing a National Museum System, Providing for its Permanent Home and for Other Purposes" which provides that " Exemption From Taxes . The Museum shall be exempt from paying import taxes and tariff duties on all art/display materials and equipment directly used for the Museum ' s non-profit programs including but not limited to books , art materials , chemicals for preservation and restoration , exhibit and technical equipment and films ." In reply, please be informed that Section 105 of the National Internal Revenue Code of 1997 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 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. . . ." (Emphasis supplied) Accordingly, the above-mentioned lease of warehouse space by Aboitiz Haulers, Inc. to the National Museum is subject to the VAT and the same may be shifted or passed on by Aboitiz Haulers, Inc. to the National Museum. Such being the case, your request that the rental billings of the lessor shall not include the VAT cannot be granted for lack of legal basis. Moreover, the aforecited Section 25 of Republic Act No. 8492 is not applicable in this case for the reason that the tax exemption granted therein to the National Museum is limited to taxes and tariff duties on importation while the instant transaction being considered pertains to a lease of property which is classified under sale of services. LLpr Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group