VAT Ruling No. 048-97

July 11, 1997 VAT RULING NO. 048-97 Sec. 102-000-048-97 Intercontinental Freight Facilitators, Inc. Units S&T, 707 Columbia Airfreight Complex I N. Aquino Ave., Paraaque 1700 Metro Manila Attention: Mr . Camilo B . Llave V . P . Finance & Administration Gentlemen : This refers to your letter dated June 6, 1996 requesting for clarification on certain issues regarding your business activity of international freight forwarding, more specifically the soliciting cargoes for airline companies for a commission. It is represented that your company, International Freight Facilitators, Inc. was incorporated last July 21, 1989 (Exhibit A) and authorized by the Civil Aeronautics Board to engage in the business of "international airfreight forwarding" for the five (5) years period from 26 April 1990 to 26 April 1995 (Exhibit B) and subsequently renewed for another period of five (5) years from 26 April 1995 to 26 April 2000 (Exhibit C); and that recently your Company's application to be registered as an IATA Cargo Agent in the Philippines has been approved effective 01 June 1996 (Exhibit D). Your queries are hereunder presented with the corresponding replies thereto, to wit: LexLib First, as to whether the 5% commission based on the freight charges from client-airline carriers converted to pesos is subject to VAT, the answer is in the affirmative, the same falling under Section 102 of the NIRC as amended, and not among any of the exempt transactions under Sec. 103. Second, as to whether you should alone shoulder the VAT, please be informed that under R.A. No. 7716, the factor used to compute the VAT from gross receipts of the seller is 1/11. This being the case, the said amount is VAT inclusive. Moreover, the seller is the party directly liable for the tax. However, subject to agreement, the seller of services may pass on the same or such portion thereof, or may altogether shoulder the VAT. Notwithstanding such stipulation, the amount in the receipts is presumed to be inclusive of tax and the person liable to pay the VAT is the seller. Thirdly, as to whether the above have been applicable since 1988 up to 1995, the answer is in the affirmative, except that during that time, the taxpayer-seller of services had the option to consider the tax as part of the selling price or to present it as a separate item in the invoice or official receipt. Lastly, as to the taxability of receipts for additional services, this Office has held that the VAT shall be imposed on the service fees collected from clients/customers. This means that the collection of purely reimbursible costs billed in the name of the client but collected through the broker or agent shall not be subject to VAT, provided that such fact of reimbursement is clearly shown in the billing and/or official receipt. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue