VAT Ruling No. 069-02

October 13, 2002 VAT RULING NO. 069-02 R.A. 8047; Secs 109 (y) & (n); 106 VAT 026-00; BIR 059-96 Bibliarch Trading c/o El Archivo, Inc. Shop 121, The Power Plant Mall 25 Lopez Drive, Rockwell Center Makati, Metro Manila Attention: Mr. Jaime Daez President Gentlemen : This refers to your letter dated August 28, 2001 requesting for confirmation to the effect that (1) your business of selling books and magazines which appear at regular intervals with fixed prices for sale, are exempt from the 10% VAT and the 3% percentage tax; and (2) your gross receipts from sale of office and school supplies are subject to the 10% VAT. It is represented that Bibliarch Trading (Bibliarch) is a single proprietorship duly registered with the Department of Trade and Industry; that it is engaged in the business of importing, exporting, buying, acquiring, holding, selling or otherwise disposing of and dealing in any books, magazines, newspapers, newsletter, pamphlets and other literary works of all kinds; and that it also sells school and office supplies. In reply, please be informed of the following: 1. Pursuant to Section 109(y) of the Tax Code of 1997, "sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements" is exempt from value-added tax. Furthermore, the term "book" shall be that as provided for under Section 3(a) and (b) of R.A. No. 8047 and as defined by the United Nations Educational Scientific and Cultural Organization (UNESCO), viz, "a printed non-periodical publication of at least forty-eight (48) pages, exclusive of cover pages, published in the country and made available to the public:" In respect to the sale of magazines and newspapers, or newsletter, the law requires that in order that the same be exempted from VAT, such newspaper, magazine, review or bulletin must appear at regular intervals with fixed price for subscription and sale and which is not devoted principally to the publication of paid advertisements. In the absence of the above criteria, your sale of magazines and newspapers or newsletter shall be subject to the 10% VAT. On the other hand, since pamphlets do not qualify in the definition of "books", the sale of the same is subject to the 10% VAT. Moreover, sale of "literary works" is exempt from VAT if it is made by the artist himself pursuant to section 109(n) of the Tax Code of 1997; otherwise, sale or importation, as in the instant case, is subject to the 10% VAT. 2. Likewise, since office and school supplies are basically items not exempt from the payment of VAT, your gross receipts therefrom shall be subject to the 10% VAT. On the other hand, if the gross receipts from sale of educational materials and equipment other than those items which are VAT exempt under Section 109 of the Tax Code of 1997, do not exceed the amount of Five hundred fifty thousand pesos (P550,000) during the taxable year the same shall, in lieu of the VAT, be subjected to the 3% percentage tax on the gross sales or receipts under Section 116 of the same Tax Code. (VAT Ruling No. 026-00 dated August 21, 2000) Finally, considering that you are engaged both in VAT and VAT exempt transactions, your gross receipts/sales from VAT exempt transactions (i.e., books and newspaper, magazine, review and bulletin) must be segregated from VATable items, henceforth, you are required to keep a separate non-Vat invoice/receipt for the purpose. (VAT Ruling No. 026-00 dated August 21, 2000) This ruling is being issued on the basis of the forgoing facts as represented. However, if upon investigation, it shall 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