VAT Ruling No. 039-94

February 8, 1994 VAT RULING NO. 039-94 Section 102 (A) (2)-039-94 Joaquin Cunanan & Co. 8th Floor, BA Lepanto Building 8747 Paseo de Roxas Makati, Metro Manila Attention: Mr . Jose S . Tayag, Jr . S i r s : This refers to your letter dated October 28, 1992 in behalf of your client IBM Philippines, Inc. It is represented that your client renders services to Gelmart Industrial Philippines, Inc., specifically rental of computer equipment and maintenance services. Gelmart refuses to pay the 10% value-added tax (VAT) billed to them by your client on the grounds that they have obtained a ruling indicating that their sale of services to Gelmart Industries, New York is automatically zero-rated. Since VAT is an indirect tax, you believe that such tax can be legally passed on by IBM to Gelmart as part of the purchase price of services rendered to the latter. Moreover, the attached VAT Ruling secured by Gelmart is not applicable and does not in anyway affect your client. Based on the foregoing you are requesting for a ruling confirming your opinion that Gelmart Industrial Philippines, Inc. is liable for the payment of VAT on the services rendered to them by IBM Philippines. In reply, please be informed that Gelmart Industrial Philippines, Inc. cannot invoke the aforecited VAT Ruling since said ruling applies only to its sale of service to Gelmart Industries, New York which was said for in foreign currency inwardly remitted to the Philippines in accordance with Central Bank rules and regulation and hence zero-rated. Such being the case, Gelmart Industrial Philippines, Inc. is liable to pay the 10% VAT passed-on by your client, IBM Philippines, for the services rendered to them. This is in accordance with Section 102(a) of the Tax Code. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue