VAT Ruling No. 018-01

April 4, 2001 VAT RULING NO. 018-01 Fas Technologies Int'l., Inc . 760 Ayala Avenue Makati City 1226 Attention: Ms . Joan Christie A . Rubinas Manager Gentlemen : This refers to your letter dated October 6, 2000 requesting in effect for a ruling that your dollar denominated transactions is subject to zero percent (0%) rate. We quote the pertinent portion of your request as follows: "FAS TECHNOLOGIES INTERNATIONAL, INC. was incorporated and registered with the Securities and Exchange Commission on September 19, 1997. The primary purpose for which it was formed is to market, sell, render, cater to, and furnish clients, whether corporations, partnerships, organizations, institutions, public and private, domestic or foreign, and/or individuals, computer services, including computer programming and such as, but not limited to, conversion work for computer programs, and in general, to carry on or conduct a computer programming business, to offer or render technical consultation in connection with computer programming problems, needs and requirements, procedures, systems, analyses and designs and other related computer programming problems, and to do all things necessary, proper, or incidental to the attainment of the foregoing purposes. "FAS is mainly engaged to do Year 2000 impact analysis and conversion projects, offshore maintenance involving revisions and enhancements for various application systems, offshore development of various software system, and data transfer and conversion development programs. "FAS's clients for the above mentioned services are mostly foreign based and are billed in foreign currency and the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). As such, pursuant to Section 108(B)(2) of the CTRP, its revenue is zero-rated. Purchases made by FAS locally are subject to input VAT which remains to be a prepaid tax asset since it can not be applied to any output VAT." In reply, please be informed that your foregoing services rendered for foreign-based clients qualify for the zero percent (0%) value-added tax, pursuant to the provisions of Section 102(b)(2), NIRC, as amended by R.A. No. 7716 (now Sec. 108(B)(2), NIRC of 1997, as renumbered), and as implemented by Section 4.102-2(b)(2) of Revenue Regulations No. 5-96, as follows: "Services other than processing, manufacturing or repacking for other persons doing business outside the Philippines for goods which are subsequently exported, as well as services by a resident to a non-resident foreign client such as project studies, information services, engineering and architectural designs and other similar services, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP." This VAT ruling shall serve as your Permit for the effective zero rating of your aforesaid sale of services for purposes of the provisions of Section 4.107-1 (d) of Revenue Regulations No. 7-95, otherwise known as the Consolidated Value-Added Tax Regulations. On the other hand, services rendered to local clients shall be subject to VAT at 10%. Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group