VAT Ruling No. 052-92

April 27, 1992 VAT RULING NO. 052-92 NIRC Sec. 102 (a) Precedent Ruling 000-00 E.F. Constantino & Co. Certified Public Accountants Room 1201 National Life Insurance Ayala Avenue, Makati, Metro Manila Attention: Emilio F. Constantino Managing Partner S i r : This refers to your letter dated February 19, 1992 seeking clarification as to the applicability of the 10% VAT on the fees received by your client from its foreign principals. It is represented that your client books talents to foreign (Japanese) principals; that it makes cash advances for talent fees, costume allowance, plane tickets, etc. to talents who are already booked; and that the foreign principals pay your client for said advances together with the service fees in dollars remitted inwardly to the Philippines and accounted for in accordance with the rules and regulations of the Central Bank of the Philippines. In reply, please be informed that pursuant to Section 102(a) of the NIRC, as amended, a 10% VAT is collected from the gross receipts of a person engaged in the sale of service. Gross receipts means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied on the services and deposits or advance payments actually or constructively received during the VAT taxable quarter for the services performed, accordingly, such cash advances and service fees are subject to the 10% VAT. However, if the service fees and advances are paid in foreign currency and inwardly remitted to the Philippines in accordance with the rules and regulations of the Central Bank of the Philippines, the same shall be subject to VAT at zero (0%) percent pursuant to Section 102(a)(2) of the Tax Code. HTCESI Very truly yours, JOSE U. ONG Commissioner of Internal Revenue By: (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge