VAT Ruling No. 050-92

April 1, 1992 VAT RULING NO. 050-92 NIRC Sec. 099 Precedent Ruling 115A-89 National Irrigation Administration NIA Bldg. Complex Quezon City Attention: Mr. Jose B. Del Rosario, Jr . Administrator S i r s : This refers to your letter dated February 19, 1991 requesting for a ruling whether the National Irrigation Administration (NIA), a contractee of a certain project, is required to refund the 6% differential between the 4% contractors tax and 10% Value Added Tax amounting to P445,197.05, to Meralco Industrial Engineering Services Corporation (MISSCOR), contractor, of the Concrete Canal Lining along Libuganon Link Main Canal for Second Davao Irrigation Project (Contract No. 2DPD-C-12). It is represented that the claim of the contractor for the reimbursement of the 6% tax differential is premised on the following: 1. The Project was bidded on April 2, 1987 and as stipulated in the Contract/Bid Documents, the Contractor shall only be subjected to four percent (4%) Contractor's Tax. 2. No provision for the additional six percent (6%) tax was made by the Contractor on their bid proposal. 3. Pursuant to the implementation of E.O. No. 273 otherwise known as the Value-Added Tax Law, effective January 1, 1988, only one percent (1%) withholding tax had been deducted by NIA from the Contractor's monthly progress billings. In reply, please be informed that in a situation where the contractor is liable or has paid the 10% VAT on a project where the negotiated/bid contract provides only for the 4% tax, the recovery of the 6% differential is a matter to be negotiated by the contracting parties. As far as the BIR is concerned, VAT is the direct liability of the seller of goods and/or services; hence, as long as the output VAT is correctly paid by the person liable therefor, it will not intervene in the private arrangement between the parties. IcDCaS Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue