VAT Ruling No. 022-91

April 3, 1991 VAT RULING NO. 022-91 The Canadian Embassy 9/F Allied Bank Centre Ayala Avenue, Makati Metro Manila Attention: Mr . Claude Latulippe Canadian Development Program Director Gentlemen : In reply to your letter dated November 2, 1990 please be informed that, as requested, all purchases of goods and services for the Davao Health Development Project, a joint project of the Republic of the Philippines and the Government of Canada through the Canadian International Development Agency (CIDA) and undertaken by the Davao Medical School Foundation, Institute of Primary Health Care (IPCH) and the University of Calgary (U of C), are exempted from 10% value added tax, pursuant to the provisions of Section 103(u), NIRC, as amended in relation to ARTICLE IV of the General Agreement on Development Co-operation between the Republic of the Philippines and the Republic of Canada, viz.: "The following shall be exempt from the value-added tax : xxx xxx xxx (u) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory . xxx xxx xxx (Sec. 103(u) NIRC, as amended by E.O. 273) "The Government of the Republic of the Philippines shall ensure that development aid funds provided under any subsidiary arrangement are not used to pay any taxes , fees, directly or indirectly by the Government of the Republic of the Philippines, on any goods, materials, equipment, vehicles and services purchased or acquired for the execution of any project being carried out in the Philippines pursuant to a subsidiary arrangement." (ARTICLE IV, RP-CANADA General Agreement on Development Co-operation) Please be informed that the 10% VAT is an indirect tax on buyers of goods and services. Since, under the said international agreement, aid funds may not be used to pay for indirect taxes vis-a-vis the purchases for the project, it follows such purchases are exempted from 10% VAT. LLphil Very truly yours, JOSE U. ONG Commissioner of Internal Revenue