VAT Ruling No. 079-99

August 9, 1999 VAT RULING NO. 079-99 Section 108 VAT Ruling No. 031-99 079-99 Pilipinas International Marketing Services, Inc . Unit 2004-2006, The Orient Square Building Emerald Avenue, Ortigas Center Pasig City Attention: Mr . Gerico R . Galgana Accounting Head Gentlemen : This refers to your letter of 02 March 1999, requesting for a ruling that your sale of service is subject to VAT at zero percent (0%). It is represented that Pilipinas International Marketing Services, Inc. (PIMSI) is a newly established corporation with the primary purpose of engaging in general marketing service, particularly tele-marketing; that you deal in all kinds of goods and services, both as principal and agent, without however engaging in the retail business; that you render service to foreign corporations, particularly Japanese corporations; that your sales and cash remittances would be foreign currency denominated and that your means of payment would consist of Yen fund transfer. In reply, please be advised that on the assumption that your primary activity is that of tele-marketing, and that you act as agents in the Philippines for Japanese corporations, your services, out of which you will be paid in foreign currency, would essentially be performed in the Philippines. Under Section 108 of the Tax Code of 1997, there is levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services performed in the Philippines. Our VAT law is basically a consumption type VAT system and follows the Destination Principle or Cross-Border Doctrine, under which goods, property or services destined to be used or consumed in the Philippines are subject to the 10% VAT while those destined, used or consumed abroad, are accorded the benefit of zero-rating. (VAT Ruling No. 031-99 dated March 18, 1999). Such being the case, your tele-marketing services remain subject to 10% VAT. cdlex Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Local & Enforcement Group