VAT Ruling No. 046-91

May 29, 1991 VAT RULING NO. 046-91 Soliman's Watchman & Security Agency Room 504 Ermita Center Building 1350 Roxas Blvd., Ermita, Manila Attention: Ms . Teresita L . Soliman General Manager Gentlemen : This refers to your letter dated December 15, 1990, furnishing this Office with a copy of MEMORANDUM OF AGREEMENT NO. 1 series of 1990, of the Philippine Association of Detective and Protective Agency Operators (PADPAO), Inc., and requesting information as to what would be the taxable base or amount subject to 10% Value-Added Tax, based on the standard compensation you receive from your clients, details of which are as follows: Monthly compensation from clients on a per security guard basis P4,885.00 ======= Distribution/disbursement thereof: 1. Monthly salary and allowances of the security guard P3,959.56 2. Monthly contribution (employer's share) to SSS; Medicare; and State Insurance P174.50 3. Agency's administrative overhead and profit margin (inclusive of VAT) P750.94 TOTAL P4,885.00 ======== Please be informed that your Agency, being engaged in the business of selling security guard services, is subject to 10% VAT based on your Agency's quarterly gross receipts. The term, "gross receipts" 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 ." (Sec. 102(a), NIRC) Thus, since the aforesaid total amount of P4,885.00 already includes the 10% VAT, your taxable gross receipts should be computed by excluding the 10% VAT forming part of the said amount (viz., P4,885.00 less 1/11th of P4,885.00 = P4,441). Your request that your taxable base be made to apply only against your Agency's administrative overhead and profit margin, VAT inclusive, i.e., against the amount of P750.94 in the above illustration, cannot be granted for lack of legal basis. This issue had already been resolved in VAT Ruling No. 232-89, issued September 13, 1989, in connection with your letter-query dated July 11, 1989 hence, already academic. This amount of P750.94 does not represent your taxable gross receipts but rather only a portion thereof. Rather, your total taxable gross receipts, excluding 10% VAT, amounts to P4,441.00. prll Very truly yours, JOSE U. ONG Commissioner of Internal Revenue