VAT Ruling No. 077-91

August 21, 1991 VAT RULING NO. 077-91 Philippine Association of Stock Transfer and Registry Agencies, Inc. (PASTRA) 3rd Floor, Asian Plaza I Sen. Gil J. Puyat Ave. Makati, M.M. Attention: Mr . Jerome A . Arcangel Chairman Gentlemen : This refers to your letter dated November 27, 1990 stating that stock transfer agents are organizations whose primary purpose is to record transfer of ownership of shares of stocks; that for services rendered, stock transfer agents are paid the sum of twenty pesos (P20.00) per certificate issued; that for transactions originating from the stock exchanges, the stock transfer agents deal directly with the clearing houses; that there are 2 clearing houses serving the needs of the 2 exchanges, namely: Equitable Banking Corporation for the Manila Stock Exchange and Rizal Commercial Banking Corporation for the Makati Stock Exchange; that billings for the transfer agent's services are in the form of Statement of Accounts which are addressed to the clearing houses; that the said clearing houses pay the transfer fees and documentary stamp taxes for the account of the stockbrokers; and that it is the stockbrokers who eventually pay the transfer fees and documentary stamps taxes by reimbursing the clearing houses for the fees they advanced to the transfer agents. It is further represented that the clearing houses refuse to pay the 10% VAT passed-on by the transfer agents on the transfer fees contending that they cannot recover it from the VAT-registered stockbrokers for refusal of the latter to pay the same; and that according to the clearing houses, the brokers refusal is premised on the fact that they will not be able to deduct these VAT payments from their output tax due, the receipts issued being not in their names. Based on the foregoing, you now request confirmation of your opinion that the transfer agents can pass on the 10% VAT on the transfer fees to the stockbrokers through the clearing houses who in turn can deduct the same from their output tax. In reply, please be informed that VAT, being an indirect tax can be passed on and once shifted, it forms part of the cost of goods or services that the non-VAT client acquires. Being non-VAT registered entities, the clearing houses, who are registered as banks, have to shoulder the passed-on VAT as additional cost on the services rendered by the transfer agents. Such being the case, the sale of services by the transfer agents is subject to VAT pursuant to Sec. 102(a) of the Tax Code, as amended. aisadc Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner Officer-In-Charge