VAT Ruling No. 052-02

September 12, 2002 VAT RULING NO. 052-02 Sec. 105 BIR Ruling No. 65-89, VAT Ruling No. 217-88 Philippine Dental Association Ayala Avenue corner Kamagong St. Makati City Attention: Dr. Armyl C. Baez President Gentlemen : This refers to your letter dated October 26, 2001 to Revenue District Officer Atty. Roberto A. Baquiran of North Makati-RDO No. 49 requesting for a certification to the effect that the Philippine Dental Association (PDA) is exempt from the payment of the 10% value-added tax (VAT). Based on the documents you have submitted, PDA is a non-stock, non-profit organization; that it is registered with RDO No. 49 as a non-VAT taxpayer since June 29, 1994; that, however, some entities charge PDA 10% VAT on its purchases of goods and services. In reply, we regret to inform you that your request cannot be granted for lack of legal basis. While PDA may be entitled to tax exemption under the National Internal Revenue Code of 1997 (Code), its exemption only covers taxes for which it is directly liable. The VAT is a tax on the person who sells, barters, exchanges, leases goods or properties, renders services, and on any person who imports goods pursuant to Section 105 of the Code. Thus, the person liable for the payment of VAT is not the purchaser but the seller or importer of goods and services. However, the seller may shift or pass on the 10% VAT to its purchaser as it is an indirect tax. Accordingly, the 10% VAT for the supply of goods and services may be passed on to PDA by its VAT-registered supplier. Once shifted, it is no longer a tax to PDA but will form part of its cost. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group