VAT Ruling No. 049-97

July 11, 1997 VAT RULING NO. 049-97 Sec. 103 (m) 000 049-97 Festo Inc. 2241 Pasong Tamo St., 1231 Makati, Metro Manila Attention: Luzvilla A . Cas Finance and Administrative Manager Gentlemen : This has reference to your letter dated May 8, 1996 requesting for a reply on two queries you have raised, viz: "1. Can we charge 10% VAT to CIT, as we are a VAT-registered company?" LLphil "2. Since CIT claimed to be VAT exempt, is it correct that they would no longer pay VAT for all their purchases?" It is represented that FESTO INC., is a domestic German-owned corporation duly registered with the Securities and Exchange Commission and the Board of Investments and is engaged in the purchase, importation and sale of pneumatic control elements and all related pneumatic products including the assembly thereof in accordance with customer's specifications, and also conduct Technology Training seminars. FESTO is a VAT-registered company which imports training equipment's to be sold to CEBU INSTITUTE OF TECHNOLOGY (CIT), an educational institution exempt from VAT. In reply, please be informed that you are subject to VAT on your sales of goods, properties and services as well as your importation, absent any showing that your transactions are among those specifically exempt under Section 103 of the National Internal Revenue Code. Since the VAT is imposed on the seller of the goods, your sales to CIT will be subject to VAT despite CIT's exemption because the taxable transaction is the sale. VAT being an indirect tax, it can be shifted to the buyer so that you are allowed to charge the 10% VAT to CIT, as part of the latter's cost or purchase price. While the CIT is exempt from VAT pursuant to Section 103 (m) of the NIRC, it cannot invoke the same exemption privilege to avoid paying VAT on its purchases of taxable goods because its exemption encompasses only taxes for which it is directly liable as a seller of educational services. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue