VAT Ruling No. 017-96

September 16, 1996 VAT RULING NO. 017-96 Sec. 99-000-017 Luna Commercial East West Venture 17 Kentucky St., SFDM Quezon City Attention: Mr . Armand Z . Dua President Gentlemen : This refers to your letters dated June 19, 1996 and July 18, 1996, requesting for a clarification on whether or not you can pass on the 10% Value-Added Tax as a cost component of your contract for services with the Girl Scouts of the Philippines (GSP), considering that GSP is enjoying tax exemption privileges under Commonwealth Act No. 542, as amended by R.A. No. 4375, P.D. No. 720 and E.O. 267. LLjur In reply, please be informed that pursuant to Section 99 of the Tax Code as amended by R.A. No. 7716, the value-added tax is an indirect tax and amount of tax may be shifted or passed on to the buyer, transferee of goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of the Act. This office has already ruled that the tax exemption of the Girl Scouts of the Philippines (GSP) covers only taxes for which it is directly liable and does not extend to indirect taxes, like VAT and other percentage taxes, which may be passed on to GSP by their supplies of goods and services (BIR Ruling No. 23-92 dated March 11, 1992). The VAT on your sales of services as a contractor is your direct liability. However, when passed on to GSP, it is no longer a tax but an additional cost which becomes a part of the amount of the contract price to be paid by GSP. Be that as it may, the matter of adjusting the contract price under your contract entered into prior to the implementation of the Expanded VAT Law on January 1, 1996 is a matter between you and GSP to agree. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue