VAT Ruling No. 032-92

March 12, 1992 VAT RULING NO. 032-92 NIRC Sec. 99 Precedent Ruling 000-00 Joint Venture of Atlantic, Gulf and Pacific Co. of Manila. Inc./Hydro Resources Contractors Corp. Marubeni Corp./Tekken Construction Company 351 Sen. Gil J. Puyat Avenue Makati, Metro Manila. Attention: Mr. Jose Efren L. Nietes Authorized Representative Gentlemen : This refers to your letter dated November 8, 1990 requesting confirmation of your opinion that 70% of your contract with the Metropolitan Waterworks and Sewerage System (MWSS) for the construction of the Main Civil Works of the Angat Dam Transmission Tunnel No. 3 (Contract T-3) which is funded by a foreign loan from the International Bank for Reconstruction and Development (IBRD) is exempt from the 10% Value-Added Tax. It appears that you were engaged by MWSS to undertake the construction of the Angat Water Supply Optimization Project; that the project is financed by the World bank under IBRD Loan No. 3124-PH; and that your Joint Venture is Composed of domestic and foreign construction firms. In reply, please be informed that under Section 28(4), Article VI, of the 1987 Constitution of the Philippines, which became effective on February 2, 1987, no law granting any tax exemption shall be passed without the concurrence of the majority of all the members of Congress. In view of said provision, since the tax exemption clause being invoked in your letter appears in the Loan Agreement entered into only on November 9, 1989 or after the effectivity of the Constitution and, further, that the same was not ratified by Congress, the Loan Agreement shall be considered as without force and effect, in so far as the tax exemption is concerned. Accordingly, your request for a Confirmation of your opinion that 70% of your contract with MWSS for the construction of the Main Civil Works of the August Dam Transmission Tunnel No. 3 (Contract T-3/ which is funded by a foreign loan from IBRD) is exempt from the 10% VAT is hereby answered in the negative. SCaEcD Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue