VAT Ruling No. 056-89

March 7, 1989 VAT RULING NO. 056-89 Grandspan Development Corporation P.O. Box 549, Manila Attention: Ms . Nancy P . Quintin Accounting Manager S i r s : This refers to your letter dated August 29, 1988, stating that your company is a subcontractor of Hyundai Engineering and Construction Co. in its project of the new ADB headquarters. It is further represented that Hyundai refuses to pay the 10% VAT included in your billing since it claims that your subcontracting services are also exempt from the payment of business tax by virtue of Ministry Order 13-86 and that its contracting services are effectively zero-rated. You now request a confirmation to the effect that Ministry order 13-86 applies also to VAT and that their claim for zero-rating is correct. In reply, please be informed that the extension of exemption privilege to subcontracts under the aforecited Ministry Order has already been superseded by Executive Order 161 (issued April 21, 1987) which exempts only direct or primary contractors. Such being the case your subcontracting services to Hyundai are not qualified for effective zero-rating; hence, the 10% VAT can be passed on to your main contractor, Hyundai Corporation. LLcd However, it is only the principal contractor who is zero rated, and all input taxes passed on by suppliers and contractors shall be credited or refunded to the principal contractor. Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner