VAT Ruling No. 020-91

April 1, 1991 VAT RULING NO. 020-91 SGV & Co. Certified Public Accountants P.O. Box 599 Manila Attention: Mr . F . G . Tagao Tax Division S i r s : This refers to your letters dated September 6, 1988, March 17, 1989 and November 10, 1989 stating that the following are the activities of your client, REUTERS LTD. (Philippine Branch), a licensed international news agency; (1) Provision of news direct to media and various business enterprises for a subscription fee, which news are delivered through printed newssheets, teleprinters and video display units. cdta (2) Service dealings consisting of installation of computer terminals linked by telephone lines which allow users to universally communicate among themselves for the purpose of trading foreign exchange. It is represented that in the belief that it is engaged in the business of selling service, your client registered under the VAT system its aforecited activities and was accordingly issued VAT Registration No. 25-4-002689, not knowing that on October 22, 1987 this Office issued a certain unnumbered ruling stating that Associated Press, an international news agency (the industry to which REUTER belongs), is exempt from VAT under Section 103(f) of the Tax Code, as amended and, therefore, need not register as a VAT taxpayer. Sometime in the early part of 1988, REUTER came across with said ruling; thence, using the decision thereof as basis, it applied for cancellation of its VAT registration through letters dated September 6, 1988 and March 17, 1989 filed for this purpose and which likewise certified that it had ceased issuing VAT invoices effective July 1, 1988. Based on the foregoing, you now request confirmation of your opinion that your client's aforesaid activities are exempt from VAT as declared in the "Associated Press" ruling and that its registration was effected erroneously and therefore should be cancelled retroactive to January 1, 1988. In reply, please be informed that the activities enumerated above are subject to VAT pursuant to Section 102(a) of the Tax Code, as amended, since the transactions partake the nature of sales of service that are being paid for in the form of subscription fees. The service rendered is not the provision of news but the installation and use of telex machines for the transmission and reception of the foreign news item. These cannot fall under Section 103(f) of the same Code which speaks of any newspaper, magazine, review or bulletin which appear at regular intervals with fixed prices, either for subscription or sale. Since the abovementioned activities have been determined to be taxable as sales of service, this ruling in effect revokes the unnumbered ruling addressed to Associated Press dated October 22, 1987. This ruling takes effect upon approval. Applying the principle that taxation should be uniform and equitable, your client's business should have been treated in the same manner Associated Press was treated or classified for VAT taxation purposes. In effect, your client's registration during the effectivity of the Associated Press ruling is without basis and therefore erroneous. Nonetheless, since REUTER has issued VAT invoices for the period from January 1, 1988 to June 30, 1988 which possibly could have generated input taxes on the part of its clients/customers, the output tax due and/or paid therefrom is legally and rightfully due the government. cdti Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner Chairman, Special Review Committee (Per RSO 1-89)