VAT Ruling No. 054-89

March 16, 1989 VAT RULING NO. 054-89 Mr. Luis V. Z. Sison Administrator Metropolitan Waterworks and Sewerage System Katipunan Road, Balara Quezon City S i r : This has reference to your letter dated December 7, 1988 requesting VAT exemption for contracts bidded out prior to the effectivity of Executive Order No. 273. It was represented that your contract documents do not allow price adjustments other than those specified in CI-11 of the Implementing Rules and Regulations of PD 1594. LLpr In reply, please be informed that pursuant to Section 6 (g) of Revenue Regulations No. 5-87, contract of MWSS are VAT-exempt if: (1) the contract is executed and completed on or before December 31, 1987 and for which payments are receivable on or after January 1, 1988, and (2) the following conditions are met: (a) an information return is filed showing the name(s) of the contractee(s) and the amount(s) of the contract price outstanding as of December 31, 1987 and containing a declaration of the obligation to pay the contractor's tax due; (b) the contractor billed the unpaid amount not later than December 31, 1987 and copy of such billing is attached to the information return required in (a) hereof; (c) The contractor has recorded in his books of accounts for the year 1987 the amount receivable; and (d) the contractor files not later than January 20, 1988, and on or before the 20th day after each calendar quarter, the regular contractor's tax return for the payment of the contractor's tax on payments received in 1988. Failure to comply with the above conditions shall automatically subject the gross receipts to the value-added tax of 10%. If VAT-exempt, the amount due shall be subject to the 4% contractor's tax. If the contract is not completed as of December 31, 1987, any payment made from January 1, 1988 and thereafter shall be subject to the 10% VAT. For this, any claim for cost escalation or adjustment is subject to the agreement between the contracting parties. Please be guided accordingly. Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner