VAT Ruling No. 056-00

December 6, 2000 VAT RULING NO. 056-00 Section 108 040-98 Flores Law Office 7307 Cypress Street Phase 1 Marcelo Green Village Paraaque City Attention: Atty . Florecita P . Flores Gentlemen : This refers to your letter dated November 19, 2000 requesting for and in behalf of your client, Alta Productions, Inc. (hereinafter referred to as Alta) exemption from the payment of the value-added tax (VAT) on the transaction described below. It is represented that Alta was contracted by Cubic Associates Innovative Communication (Cubic), a foreign corporation based in Seoul, South Korea, to produce the television show known as the "LG Quiz"; that under said agreement, Alta provides the creative and production staff, technical personnel and equipment for the production of the weekly show aired in Channel 7; and that in consideration for its services, Alta is paid by Cubic in dollars via telegraphic transfers. It was also stressed that the said television show is not commercial in nature but rather a vehicle that aims to promote educational and intellectual fun, and competition among secondary students in Metro Manila. In reply, please be informed that the Philippine's Value Added Tax (VAT) law adheres to the "Cross Border Doctrine" of the VAT System. which basically means that no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence actual export of goods and services from the Philippines to a foreign country must be free of VAT. Conversely, goods, property and services destined to, used or consumed in the Philippines are subject the 10% VAT (VAT Review Committee Ruling No. 040-98 dated November 23, 1998). HcTSDa Considering that the above television show production services are rendered by Alta within the Philippines and the same is being aired locally, the receipt of the consideration therefor, despite its being in the form of foreign currency and notwithstanding the educational and intellectual objectives of the TV show, is subject to the 10% VAT imposed under Section 108 of the Tax Code of 1997. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group