VAT Ruling No. 070-99

July 16, 1999 VAT RULING NO. 070-99 109 057-98 070-99 Congressman Florencio B . Abad Lone District of Batanes House of Representatives S i r : This refers to your letter dated March 22, 1999 requesting for the VAT exemption of the hospital equipment and supplies to be donated by Helpgoodcenter, a dutch NGO to the Batanes General Hospital located in Basco, Batanes. As apprised by NEDA, some of the these donated items particularly the used clothings and linens will be charged with VAT. In as much that these are all used items to be given to the indigent patients and the poor people in Batanes and that the province of Batanes can not afford to pay for the tax requirement on these donated items due to its small revenues, you are now requesting that these items be exempted from the imposition of the ten percent (10%) VAT. In reply, please be informed that Section 109 of the 1997 Tax Code has provided for an enumeration of transactions exempt from the imposition of the ten percent (10%) VAT. Nowhere in the provision of said Section is it stated that donations made by non-residents are exempt from the imposition of the tax unless there is an international agreement executed between the donor's country and that of the Philippines that VAT shall not be imposed on such donations. The grant of tax exemption can not be granted on mere grounds of equity. It can not be created by implication because exemptions from taxation are highly disfavored in law and the one who claims exemption from tax must be able to justify his claim by the clearest grant of organic or statute law. Thus, in the absence of an express provision of law or international agreement providing for the VAT exemption of such donation, it is with regret that your request for VAT exemption is hereby denied for lack of legal basis. Such donations are subject to the imposition of the ten percent (10%) VAT pursuant to Section 4.101-1 of Revenue Regulations No. 7-95, as amended. (VAT Ruling No. DA-057-98 dated November 18, 1998) llcd Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Local & Enforcement Group)