VAT Ruling No. 048-02

August 12, 2002 VAT RULING NO. 048-02 108 (B) (2) 038-2001 Sesamo, Inc. 7F Don Jacinto Building 141 Salcedo Street, Legaspi Village Makati City Attention: Mr. Jerevien Ladores Administration Officer Gentlemen : This refers to your letter dated March 14, 2002, together with a photocopy of the Contract pertinent to the issue, indicating that Sesamo, Inc. (Sesamo) is a resident corporation providing accounting services to Alitalia Linee Aeree Italiane (Alitalia Airlines) a resident foreign (Italian) corporation, the fees for which are paid in Philippine Pesos inwardly remitted from Italy to your Peso bank account. You now request for confirmation that the said services are subject to zero-percent (0%) value-added tax (VAT). In reply, please be informed that under Section 108(B)(2) of the Tax Code of 1997 and Sec. 4.102-2(b)(2) of Revenue Regulations No. 5-96, as amended by Rev. Regs. No. 6-97, services other than processing, manufacturing or repacking for goods which are subsequently exported, in order to qualify as zero-rated VAT transaction, must have been rendered to a person doing business outside the Philippines or to a non-resident foreign client, and that the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. The accounting service you rendered to Alitalia Airlines will not qualify as a zero-rated VAT transaction under Sec. 108(B)(2) of the said Tax Code because it is not rendered to a person doing business outside the Philippines nor to a non-resident foreign client, and that it is not paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group