VAT Ruling No. 032-00

September 8, 2000 VAT RULING NO. 032-00 R.R. 8-99 066-99 Diaz, Murillo, Dalupan 5th Flr. Don Jacinto Building Dela Rosa corner Salcedo Sts. Legaspi Village, Makati City Attention: Atty . Millard M . Manseguiao Gentlemen : This refers to your letter dated June 4, 1999 requesting, on behalf of your client, HOYA LENS PHILIPPINES, INC ., for exemption from the coverage of Revenue Regulations No. 8-99 until the end of the present calendar year on the ground that your client's invoicing system is computerized and any change will entail additional cost because it will require coordination with and servicing by its Information System Division in Japan. In reply, there is quoted hereunder the pertinent portion of VAT Ruling No. 066-99 dated July 14, 1999 which succinctly states the reason for the promulgation of Revenue Regulations No. 8-99 in this wise: ". . . the said pronouncement (referring to Revenue Regulations No. 8-99) merely seeks to enforce a direct provision of the law on the matter. Prior to the enactment of Republic Act No. 7716, otherwise known as the Expanded Value-Added tax Law, VAT-registered taxpayers have the option to indicate VAT as a separate item in the invoice/receipt. However, the said law effectively repealed that option when it mandated that the VAT shall be determined by multiplying the total amount indicated in the invoice by one-eleventh (1/11). This provision is now embodied in Section 106(D)(1) and Section 108(C) of the Tax Code of 1997 (then Sections 100(d)(1) and 102(c), NIRC), as implemented by Revenue Regulations No. 7-95. "The said rule is not without any underlying reason. It is precisely appended into the law to address the concern of the consuming public that business establishments may be able to obscure the fact that the VAT is already included in their cost such that if the VAT is allowed to be indicated as a separate item in the invoice, they may be able to charge additional billings in the guise of VAT, hence unduly profiting thereon. On the part of tax administration, what is sought to be removed is the false notion, and convenient excuse, that VAT is the reason for any price increase. Thus, what has been put into place is the credit invoice type method of recognizing input VAT. Simply put, all one has to do to determine the amount of his input VAT is to look into the gross amount indicated in his receipt and divide it by 1/11, no more, or less. EHaCID "This is now, and as it should be, the proper manner of issuing VAT invoice. And for the uniform implementation of this rule, the same was duly disseminated to the public through the official publication or announcement thereof." In view of the foregoing, we regret to deny your aforesaid request for lack of legal basis. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue