VAT Ruling No. 024-99

March 11, 1999 VAT RULING NO. 024-99 Sec. 108 (A) -230-88-024-99 Marciano P . Felipe Bureau of Internal Revenue Revenue District No. 20 Balanga, Bataan S i r : This refers to your letter dated August 7, 1998 requesting for a ruling as to the basis of VAT on services rendered and billed by a security agency, e.g. Kagitangan Investigation Security Agency, Inc.,a domestic corporation duly registered with SEC and with office of Balanga, Bataan. The query posed is whether output tax is imposed on the gross billings or the net of gross billings less the salary of the guards. In reply, please be informed that Section 108(A) of the 1997 Tax Code imposes 10% VAT on the gross receipts derived from the sale or exchange of services. The term " sale or exchange of services " has been defined in said Section as '' the performance of all kinds of services in the Philippines including those performed or rendered by construction and service contractors ......"." Gross receipts" on the other hand, means "the total amount of money or its equivalent representing the contract price compensation service fee rental or royalty including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding the VAT ." Corollary thereto, Section 108(C) of same Code has likewise provided for the manner by which the tax is to be determined, viz : "(C) Determination of Tax The tax shall be computed by multiplying the total amount indicated in the official receipt by one-eleventh (1/11)." Accordingly, the output tax due from Kagitangan Investigation Security Agency Inc. as a security service contractor, shall be based on its gross receipts and not on the agency share which is arrived at after deducting the amounts paid for the salaries of guards (BIR Ruling No. 230-88 dated June 2, 1988).Thus, if the contract rate per month per guard service is P5,925, the corresponding output tax shall be determined by multiplying the said monthly contract rate by 1/11. This ruling is being issued on the basis of the facts represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group