VAT Ruling No. 019-90

January 23, 1990 VAT RULING NO. 019-90 Mr. Cesar B. Rivera Certified Public Accountant No. 130 A. Mabini Street Mandaluyong, Metro Manila S i r : This has reference to your letter dated June 30, 1989 requesting information on (a) whether or not the 10% value-added tax on the gross receipts of a contractor of government entities shall form part of the agreed contract price (b) whether or not government entities/contractees are authorized to withhold, from the contractor, the 10% value added tax, under the provisions of R.A. 1051. cdti In reply, please be informed as follows: (a) Your client which is engaged in the construction business is subject to 10% VAT on its gross receipts derived from its sale of services performed for other persons (whether private or government agencies) regardless of whether or not the construction contract mentions anything about the VAT. The term "gross receipts" means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for services performed or to be performed for another person, excluding the value-added tax (Sec. 2(m), Revenue Regulations No. 5-87). (b) Government entity-payors are constituted as withholding agents under R.A. 1051, provided that the amount of tax, due from the payee for its money payment, can be fixed, determined, computed or ascertained (Sec. 1, R.A. 1051). However, the VAT due and payable by the contractor cannot be fixed, determined, computed or ascertained by the contractee-government, entity because from the output tax due on the gross receipts, the contractor is entitled to input tax credit for VAT paid on his purchases. Accordingly, 10% VAT is not covered by the withholding requirement of R.A. 1051 (See Paragraph 1, Revenue Memorandum Circular No. 18-88, promulgated March 24, 1988). [". . . the value-added tax, the amount which cannot be fixed, determined, computed or ascertained at the time of such payments by the government offices, instrumentalities and agencies is not subject to the withholding and remittance provisions of R.A. 1051 . . . (RMC 18-88, ibid)] cdta Very truly yours, JOSE U. ONG Commissioner of Internal Revenue