VAT Ruling No. 023-03

March 3, 2003 VAT RULING NO. 023-03 Sec. 105 VAT Ruling Nos. 005-00/072-01 Balikkalikasan Babilonia-Wilner Foundation Inc. Rm. 401 San Luis Terraces 638 T. M. Kalaw St., Ermita, Manila Attention: Mr. Enrique A. Nuez, Jr. Director Gentlemen : This refers to your letter dated July 29, 2002 requesting for exemption from the value-added tax (VAT) as a non-stock, non-profit organization for legal and document representation and other purposes. Based on records submitted with your aforesaid letter, it appears that your foundation is a non-stock non-profit organization duly licensed in the Philippines as evidenced by SEC Registration No. AFO95-102 which is not organized for the private gain of any person and whose specific and primary purpose is to engage solely in charitable and educational activities and that its way of carrying out the foundation's projects is through donations and the funds that come from the home office. In reply, please be informed that, under Section 105 in relation to Sections 106, 107, and 108 of the National Internal Revenue Code of 1997, the 10% VAT is imposed on "any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods". Accordingly, since no amount of the revenues are derived from sale of services or sale of goods made in the course of business but rather in connection with its non-stock non-profit activities, the revenues thereof derived from donations are exempt from the 10% VAT. (VAT Ruling No. 005-00) However, the above exemption from the 10% VAT does not extend to importation of goods or purchase of goods and services. The 10% VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. (Sec. 105, NIRC of 1997) (BIR VAT Ruling No. 72-01) . Since there is no showing that the foundation is exempt from indirect tax under any existing law, the foundation's purchases of goods, properties or services from VAT-registered entities as well as importation of goods are subject to 10% VAT. Please be guided accordingly. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group