VAT Ruling No. 059-02

September 16, 2002 VAT RULING NO. 059-02 108 (B) (2) Resources, Environment and Economics Center For Studies, Inc. Suite 405, The Tower of Emerald Square J. P. Rizal cor. P. Tuazon Streets, Project 4 Quezon City Attention: Ms. Lota A. Ygrubay Executive Director Gentlemen : This refers to your letter dated May 24, 2002, requesting for a clarification on the BIR Ruling which states that "service income in foreign currency inwardly remitted pursuant to and in accord with CB rules qualifies for 0% VAT". It is represented that Resources, Environment and Economics Center For Studies, Inc. (REECS) is engaged in conducting various researches for and providing consultancy services to both local and foreign agencies; that, in some cases, your company receives payments in the form of "research grants", which are in United States dollars inwardly remitted by funding agencies such as: (a) International Institute for Environment and Development; (b) Economy and Environment Program for South East Asia; and (c) The Asian Development Bank, specifically for the following projects "Promotion of Renewable Energy, Energy Efficiency and Greenhouse Abatement" and "Strengthening Export Competitiveness". In reply, please be informed that under Section 108(B)(2) of the Tax Code of 1997, as implemented by Revenue Regulations No. 7-95, as amended by Rev. Regs. 6-97, more particularly Sec. 4.102-2(b) thereof, services rendered by a resident to a non-resident foreign client, such as project studies, information services, engineering and architectural design and other similar services, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP, shall be subject to a zero percent (0%) value-added tax. Accordingly, the research activity and consultancy service, which are both similar to a project study and an information service, that is paid for in US dollars inwardly remitted shall qualify as a zero-rated VAT transaction if rendered by your company to a non-resident foreign client. It must be noted that, to qualify as a zero-rated VAT transaction, the said services must not only be paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP but must also be rendered directly to a non-resident foreign client. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group