VAT Ruling No. 039-92

March 26, 1992 VAT RULING NO. 039-92 NIRC Sec. 102 (a) Precedent Ruling 000-00 Ms. Ma. Teresa A. Azul R.C. Artillaga & Associates 320 Libertad St., Pasay City M a d a m : This refers to your letter dated August 20, 1990 stating that your client, is a VAT-registered labor contracting firm providing manpower services to various companies; that your client has a prospective customer who is VAT-registered exporting 100% of its finished products; and that the latter intends to contract with your client its total manpower requirements from supervisors to workers. Based on the foregoing, you now present the following queries: "1. Can your client forego the 10% VAT charge as requested by its prospective customer?" "2. If the 10% VAT is required to be charged, on what basis would the tax be computed the charges as per contract; the total charges net of fees directly remitted to various payees' (employees, SSS etc.) or service charges only?" In reply, please be informed of the following: 1. Your client cannot forego the payment of the 10% VAT. VAT is imposed on the seller of services based on gross receipts which means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax pursuant to Section 102 of the Tax Code. 2. Pursuant to Section 102(a) of the Tax Code, as amended, the VAT shall be based on the total gross receipts, which includes salaries and allowances of the employees, the SSS and medicare contributions to the government, administrative overhead plus margin of profit or agency fees. This finds support under VAT Ruling No. 232-89. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue