VAT Ruling No. 046-97

July 11, 1997 VAT RULING NO. 046-97 Sec. 102-000-046-97 Marietta H. Dizon 11 Apollo St. Acropolis Greens Libis Quezon City M a d a m : This refers to your letter dated April 30, 1996 requesting for a confirmation of the opinion of your lessee that he is exempt from the value added tax in accordance with Executive Order No. 226 as amended (otherwise known as the Omnibus Investments Code of 1987). It is represented that Mr. Donald R. Felbaum, Managing Director of OPTEL LTD. (a Board of Investments registered firm), leases your property for use of its regional headquarters. You now wish confirmation of your lessee's opinion that he is exempt from value added tax on the basis of Executive Order No. 226 as amended, the pertinent portion of which states: "ART. 65. Exemption from all Kinds of Local Licenses, Fees, Dues . The regional or area headquarters of multinational companies shall be exempt from all kinds of licenses, fees, dues, imposts or any other local taxes or burdens." In reply thereto, please be informed that the exemption granted under Art. 26 of EO 226 covers only direct taxes and not indirect taxes such as the value added tax for which you, as lessor, are directly liable for. This exemption granted to regional or area headquarters of multinational companies cannot be extended to you as the VAT taxpayer. The VAT in this instance is not a tax on the regional or area headquarters of the multinational company but merely part of your cost of lease which you are passing on to your lessee. In view of the foregoing, the request for exemption of OPTEL, LTD. from the value added tax (VAT) cannot be granted for lack of legal basis. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue