VAT Ruling No. 055-03

December 15, 2003 VAT RULING NO. 055-03 Section 119 VAT Ruling No. 056-98 Starnet Cable Corporation Stall No. 7 Omega San Gabriel Teresa, Rizal Attention: Mr. Romeo V. Padagas General Manager Gentlemen : This refers to your letters dated February 3, 2000 and July 12, 2000 requesting exemption from the Value Added Tax (VAT). It is represented that the basis for your exemption is a ruling granted by the VAT Review Committee dated December 2, 1998; that as a holder of a franchise and grantee of Provisional/Certificate of Authority to Operate Cable TV in the Philippines as governed by Executive Order No. 205; that you are categorized as broadcast media; and that under Administrative Order No. 6-97, radio and TV broadcasting stations with gross revenue of not more than Ten Million Pesos for the preceding year are not subject to ten percent (10%) value added tax but only to franchise tax of 3%. In reply, please be informed that as a grantee of a certificate of authority to operate Cable TV issued by the National Telecommunications Commission pursuant to Executive Order No. 205, your firm belongs to the category of radio and television broadcasting companies referred to under Section 119 of the Tax Code of 1997, which provides, viz : "Sec. 119. Tax on Franchises Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year does not exceed Ten Million pesos (P10,000,000.00), subject to Section 236 of this Code, a tax of three percent (3%) . . . on the gross receipts derived from the business covered by the law granting the franchise: Provided, however, That radio and television broadcasting companies referred to in this Section shall have the option to be registered as value-added taxpayers and pay the tax due thereon: Provided, further, That once the option is exercised, it shall not be revoked." Such being the case, you as a holder of a certificate of authority to operate a Cable TV network (the operation of which is regulated by executive Order No. 205 signed by then President Corazon C. Aquino on June 30, 1987) with annual gross receipts for the preceding year of not more than P10,000,000.00, is subject to the three percent (3%) franchise tax on gross receipts derived from the business covered by the law granting the franchise and, accordingly, you should be registered as a non VAT taxpayer. The Tax Code, however, gives you an option to be registered as VAT taxpayer and pay the value-added tax provided that once the option is exercised, the same shall not be revoked. Corollary, whenever the annual gross receipts for the preceding year shall exceed P10,000,000.00, a Cable TV operator has no other alternative but to register as a VAT taxpayer and pay the 10% VAT imposed under Section 108 of the Tax Code of 1997. TEHIaD This ruling is based on the foregoing facts as represented. If, however, it will be disclosed in an investigation that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group