VAT Ruling No. 066-99

July 14, 1999 VAT RULING NO. 066-99 106 (D) (1); 108 (C) 000-00 066-99 Mr . Peter Wallace President EIU Philippines, Inc. 14th Floor, Sagittarius Building H.V. dela Costa Street Salcedo Village, Makati City S i r : This refers to your letter dated 19 May 1999 addressed to the Honorable Secretary of Finance in which you have expressed certain reservation about the propriety of BIR's announcement to the effect that VAT-registered establishments can no longer indicate the VAT as a separate item in the official receipt under pain of penalty therefor (Revenue Regulations No. 8-99). cdll As the interpretation of the provisions of the Tax Code is under the exclusive and original jurisdiction of the Commissioner of Internal Revenue pursuant to Section 4 of the Tax Code of 1997, your letter was referred to this Office for direct comment. In reply, please be informed that the said pronouncement merely seeks to enforce a direct provision of the law on the matter. Prior to the enactment of Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law, VAT-registered taxpayers have the option to indicate VAT as a separate item in the invoice/receipt. However, the said law effectively repealed that option when it mandated that the VAT shall be determined by multiplying the total amount indicated in the invoice by one-eleventh (1/11). This provision is now embodied in Section 106(D)(1) and Section 108(C) of the Tax Code of 1997 (then Sections 100(d)(1) and 102(c), NIRC), as implemented by Revenue Regulations No. 7-95. The said rule is not without any underlying reason. It is precisely appended into the law to address the concern of the consuming public that business establishments may be able to obscure the fact that the VAT is already included in their cost such that if the VAT is allowed to be indicated as a separate item in the invoice, they may be able to charge additional billings in the guise of VAT, hence unduly profiting thereon. On the part of tax administration, what is sought to be removed is the false notion, and convenient excuse, that VAT is the reason for any price increase. Thus, what has been put into place is the credit invoice type method of recognizing input VAT. Simply put, all one has to do to determine the amount of his input VAT is to look into the gross amount indicated in his receipt and divide it by 1/11, no more, no less. This is now, and as it should be, the proper manner of issuing VAT invoice. And for the uniform implementation of this rule, the same was duly disseminated to the public through the official publication or announcement thereof. We appreciate your concern and trust that we have addressed your query. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue