VAT Ruling No. 067-92

May 18, 1992 VAT RULING NO. 067-92 NIRC Sec. 100 (b) Precedent Ruling 000-00 International Bulk Commodities Handling and Trading Corporation 6th Floor Herrera Wing Phil. Banking Building Ayala Ave., Makati, M.M. Attention: Ms. Ma. Cristina L. Maglutac Gentlemen : This refers to your letter dated February 26, 1992 requesting a ruling whether dividends paid in the form of property, i.e., vehicle, equipment, etc., are subject to VAT. Further, it is orally represented that the equipment to be distributed consists of bagging machines, bag closers, weighing scales, and other similar items classified as personal properties; and that you are a VAT-registered person. In reply, please be informed that pursuant to Section 4 of Revenue Regulations No. 5-87, implementing Section 100(b) of the Tax Code, stating "Sec. 4. Transactions "deemed sale" . The following transactions are "deemed sale pursuant to Section 100(b): "(A) Transfer, use or consumption not in the course of business. Transfer of goods not in the course of business can take place when the VAT-registered person withdraws goods from his business for his personal use; (B) Distribution or transfer to shareholders or investors as share in the profits of the business;" the distribution of dividends to your shareholders in the form of personal properties which are used in your VAT taxable business is "deemed sale"; hence, subject to 10% VAT pursuant to the aforesaid provision of the Tax Code. Your VAT liability thereon is subject to deductions by whatever input tax credit may be available at the time of distribution. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue