VAT Ruling No. 045-90

February 15, 1990 VAT RULING NO. 045-90 Associated General Builders Corp. 1127 Epifanio de los Santos Ave. Balintawak, Quezon City Attention: Mr . Ernesto Lopez President S i r s : This is in connection with your letter dated May 10, 1989 wherein you stated that your contract with the Department of Public Works and Highways (DPWH) executed in 1981 was completed and finally paid in June 1987; and that since the contract recognizes that in case of any adjustment in the contract price, you are entitled to file a claim for foreign currency adjustment (per DPWH Department Order No. 56, Series of 1988) whose amount was determined and for which payment was approved only in the early part of 1989. As represented further, the said amount intended for the adjustment or escalation was not billed on or before December 31, 1987; hence you have not recorded the same in your books of accounts for the year 1987, being not yet a valid receivable account. Based on the foregoing, you now request that the said amount due from completed contract in 1987 and intended for escalation be exempt from VAT inspite of your failure to meet the conditions under Section 6(g) of Revenue Regulations 5-87. In reply, please be informed that since your failure to bill the aforecited amount is already beyond your control but within the constraints of government policies, your gross receipts representing claims for adjustment are exempt from the value added tax. In lieu thereof, they are subject to 4% contractors' tax, the payment of which shall be withheld by the government agency. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue