VAT Ruling No. 060-92

May 6, 1992 VAT RULING NO. 060-92 NIRC Sec. 99 Precedent Ruling 032-92 National Electrification Administration D&E Building, Quezon Avenue Quezon City Attention: Ms. Thelma C. Aguila Manager, Loans Dept. Gentlemen : This refers to your letter dated July 3, 1991 requesting for a confirmation that your procurement funded by the USAID Grant shall be subject to zero rate value added tax, pursuant to VAT Ruling No. 012-91 dated March 12, 1991. The "Project Grant Agreement between the Republic of the Philippines and the United States of America for the Rural Electrification Project" dated September 28, 1988 copy of which was furnished with your said letter, provides: "Section B.4. Taxation . (a) This Agreement and the Grant will be free from any taxation or fees imposed under laws in effect in the territory of the Grantee. (b) To the extent that (1) any contractor, including any consulting firms, any personnel of such contractor financed under the Grant, and any property or transactions relating to such contracts; and (2) any commodity procurement transaction financed under the Grant are not exempt from identifiable taxes, tariffs, duties, or other levies imposed under laws in effect in the territory of the Grantee, the Grantee will, as and to the extent provided in and pursuant to Project Implementation Letters, pay or reimburse the same with funds other than those provided under the Grant." In reply, please be informed that under Section 28(4), Article VI, of the 1987 Constitution of the Philippines, which became effective on February 2, 1987, no law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. In view of said provision, since the tax exemption clause you are presently invoking is contained in the Exchange of Notes which was entered into on June 27, 1987, or after the effectivity of the 1987 Constitution of the Philippines, and the fact that the Notes which constitutes the international agreement between both governments have not been ratified by Congress, the tax exemption clause therein shall be considered as without force and effect. Accordingly, your request for a confirmation of your opinion that you are exempt from VAT and that your contractors and suppliers are zero-rated is hereby answered in the negative. AcDaEH Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge