VAT Ruling No. 026-96

September 23, 1996 VAT RULING NO. 026-96 Sec. 102 (a)-000-026 Integrated Finance Operations CAP Legaspi Bldg., 149 Legaspi St. Legaspi Village 1229 Makati City Attention: Mr . Alfredo R . Collado Senior Vice-President Gentlemen : This refers to your letter dated February 7, 1996, requesting for a waiver of the requirements of RMC No. 13-96 requiring that the amount of contribution to trust fund be indicated in the VAT official receipt, as stated in Answer 10 to Question 10, quoted hereunder: LLjur "Q-10 What is the nature of business and the tax liability of pre-need companies? A-10 Pre-need companies shall be considered as dealer in securities and shall be subject to VAT based on their gross income. Gross income shall mean actual receipts on contract price minus contributions to the trust fund to be set up independently as mandated by the Securities & Exchange Commission. The amount of such contribution shall be indicated in the VAT official receipt, otherwise the entire amount shall be subject to VAT . (emphasis ours) cdta Corollarily, the input tax allowable to the customer shall be based on the amount of the contract price net of the trust fund contribution." It is represented that your companies, College Assurance Plans Phils., Inc. and Comprehensive Annuity Plans and Pension Corp. which are classified as pre-need companies will have great difficulty to comply to the above requirement; that cashiers located nationwide do not have the information of the trust fund contributions for each and every payment to be received from your planholders; that the amount contributed to the trust fund varies from year to year during the payment period of the plan, and that by indicating the trust fund contributions you might adversely affect your marketing efforts and unduly disclose some trade secrets. In reply, please be informed that the VAT liability of dealers in securities prescribed by Section 102 of the Tax Code, as amended by Republic Act No. 7716, as implemented by Revenue Regulations No. 7-95, is computed on gross income. Gross income shall mean actual receipts on contract price minus contributions to the trust fund to be set up independently as mandated by the Securities & Exchange Commission. The amount of such contribution shall be indicated in the VAT official receipt, otherwise the entire amount shall be subject to VAT. Corollarily, the input tax allowable to the customer shall be based on the amount of the contract price net of the trust fund contribution. In other words, the procedure prescribed in A-10 cannot be dispensed with. LibLex Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue