VAT Ruling No. 034-99

March 23, 1999 VAT RULING NO. 034-99 Sec. 105 007-96 034-99 Manila International Airport Authority (MIAA) Ninoy Aquino Int'l. Airport, Manila Attention: Mr . Antonio P . Gana General Manager Gentlemen : This refers to your letter of 29 January 1999 concerning your request on whether or not the 10% value-added tax (VAT) may be passed on to you by your supplier of services, Power Generation of the Philippines, Inc. (PGI for short). cdll It is represented that MIAA entered into an agreement with PGI for the construction, operation and management of a 24 MW diesel power station supplying part of the power requirement of the MIAA; that PGI passes on to MIAA 10% VAT on its sales of services to MIAA; that, MIAA is of the opinion that the passing on of the 10% VAT by PGI is not mandatory considering the provisions of Section 105, NIRC of 1997, because of the phase " the amount of tax may be shifted ' the pertinent portion of which provides: " The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services . This rule shall likewise apply to existing contracts of sale of goods, properties or services at the time of the effect of Republic Act No . 7716 ." In reply, please be informed that the 10% value-added tax is an indirect tax, hence, may be shifted or passed on by the seller/supplier to the buyer, transferee or lessee of the goods, properties or services (VAT Ruling No. 007-96, dated May 14, 1996). The word "may" pertains to the seller/supplier rather than to the buyer, transferee or lessee. Thus, MIAA as the buyer of services, may not legally oppose the pass-on of the 10% VAT on its purchase of services from PGI. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group