VAT Ruling No. 031-96

October 30, 1996 VAT RULING NO. 031-96 Sec. 102-000-031 BMWR Trading and Construction, Inc. 23 Lanete St., Project 7 Quezon City Attention: Mr . Rafael D . Diaz, Jr . President Gentlemen : This refers to your letter dated June 26, 1996 stating that your firm was a subcontractor to a company (the contractor) having a contract with the National Power Corporation (NAPOCOR) and that the contractor withheld the value added tax (VAT) from your billings. Accordingly, you now ask the following: cdtech 1. Is the contractor right in its claim? 2. If not, what can we do to claim the amount we were then deprived? 3. Is there a rule, policy or regulation that deals on the VAT application between the government and private contractor, between private contractors? 4. Is there a prescriptive period to claim for a refund? In reply, please be informed as follows: 1. The contractor is not correct in withholding the VAT from your billings as there is no provision in the Tax Code, nor in any other statute, which requires the withholding of VAT by a private person from its payment to another, except with respect to payments of rentals and/or royalties to non-resident lessors and/or licensors and reinsurance premiums to non-resident reinsurance companies (Sec. 4.110-3, Rev. Regs. 7-95). cdta 2. Considering that your services under the sub-contract agreement were not paid in full, you have the right to demand payment for the balance from the contractor. 3. Title IV of the National Internal Revenue Code (NIRC), as amended, specifically, Section 110 thereof, as implemented by Revenue Regulation No. 7-95, provide the rules on withholding of creditable VAT. 4. Refund of erroneously paid internal revenue taxes prescribes in two (2) years from the date of payment (Sec. 230, NIRC) while actions founded upon a written contract prescribed in ten (10) years (Art. 1144, Civil Code of the Philippines.) prll Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue