VAT Ruling No. 049-98

December 2, 1998 VAT RULING NO. 049-98 109 (m)-000-00-049-98 Development Academy of the Philippines DAP Building, San Miguel Avenue Pasig City Attention: Ms . Carmencita T . Abella President Gentlemen : This refers to your letter dated April 28, 1998 requesting for confirmation of your opinion that the Development Academy of the Philippines (DAP) is exempt from the value-added tax (VAT). It is represented that the DAP is a body corporate created by virtue of Presidential Decree No. 205, as amended by Presidential Decree No. 1061 and Executive Order No. 288, for the following purposes, thus (a) To foster and support the developmental forces at work in the nation's economy thru selective human resources development programs, research, data collection, and information services, to the end that the optimization of wealth may be achieved in a manner congruent with the maximization of public security and welfare; (b) In line with the foregoing objective, to promote, carry on and conduct scientific, inter-disciplinary and policy oriented research, education, training, consultancy, and publication in the broad fields of economics, public administration, and the political and social sciences, generally involving the study, determination, interpretation and publication of economic, political and social facts and principles bearing upon development problems of local, national or international significance; (c) To discharge a regional role in initiating and catalyzing exchange of ideas and expertise on development activities in the region of Asia and the Far East; that in line with paragraph (b) of the above purposes, education is one of the fields that may be entered into by the DAP in the pursuit of its broad objectives; and that in separate opinions of the Office of the Secretary of Justice (DOJ Opinion No. 175, Series of 1992) and Office of the Government Corporate Counsel (OGCC Opinion No. 75, Series of 1997), it was held that the DAP is a government educational institution rendering educational services. You also anchor your claim on Section 12 of PD No. 205 which provides that "The Academy, its assets, acquisition, income and its operations and transactions shall be exempt from any and all taxes, fees, charges, imposts, licenses and assessments, direct or indirect, imposed by the Republic of the Philippines or any of its political subdivision or taxing authority thereof, except import taxes, duties and fees." In reply, please be informed that Section 109(m) of the Tax Code 1997 provides that "Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (DECS) and the Commission on Higher Education (CHED), and those rendered by government educational institutions" are exempt from the value-added tax. Such being the case, considering that the DAP has been held to be a government educational institution, its gross receipts derived from rendering educational services and other activities incidental thereto are exempt from the VAT pursuant to Section 109 of the Tax Code, as amended. With respect, however, to its gross receipts on activities other than educational services and from those which are incidental thereto, such as consultancy services, etc., please be informed that the Academy is subject to the VAT imposed under Section 108 of the Tax Code of 1997. The tax exemption of the Academy under Section 12 of Presidential Decree No. 205 may no longer be invoked as the same has been revoked by Executive Order No. 93 issued sometime in November 1986. This ruling is 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, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue