VAT Ruling No. 057-98

November 18, 1998 VAT RULING NO. 057-98 Sec. 101 (B) (2)-000-00-057-98 Mr. Jose P. Tabbada Director Center for Policy and Administrative Department College of Public Administration University of the Philippines CPA Bldg., Diliman, Quezon City P.O. Box 198 Gentlemen : This refers to your letter dated October 29, 1998 requesting that the shipment of donated medicines and medical supplies donated by the People Helping People Foundation in Lake Charles, L.A., U.S.A. to the Forest Foundation in Mindanao be exempt from value added and donors taxes. It is represented that both foundations which are charitable and non-profit organizations are requesting exemption from payment of said taxes considering that said goods are all intended for charity and for the use and benefit of the indigent and the poorest of the poor among the people in Mindanao. It is further represented that said medicines and medical supplies have been in Cagayan de Oro Port for almost a year now and that the National and Economic Development Authority (NEDA) approved on September 1, 1998, the release of the same duty free but subject to the payment of the VAT imposed under Section 101 of the NIRC. In reply, please be informed that although the donation of said medicines and medical supplies are exempt from the donor's tax under Section 101(B)(2) of the NIRC, the same is subject to the value added tax. Section 4.101-1 of Revenue Regulations No. 7-95 provides that "the VAT is imposed on goods and properties brought into the Philippines, whether for use in business or not. The tax shall be based on the total value, used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges prior to the release of the goods or properties from customs custody such as postage, commissions, and other similar charges." Your request therefore for value added tax exemption of the aforesaid medicines and medical supplies is hereby denied for lack of legal basis. cdt Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue