VAT Ruling No. 086-02

November 21, 2002 VAT RULING NO. 086-02 105 000-00 Medecins Sans Frontieres Doctors Without Borders Unit 2, Block 6, Greenhaven Parkhomes 318 Santolan Road 1112 Quezon City Attention: Mr. Laurence Nguyen Country Administrator Gentlemen : This refers to your letter dated July 26, 2002, in effect requesting for exemption from VAT being billed by your suppliers, communication company, insurance company and other companies on your purchases/transactions with them. It is represented that MEDECINS SANS FRONTIERES (MSF) ARTSEN ZONDER GRENZEN BELGIUM, is a corporation organized and existing under the laws of Belgium whose main objective and mission is to provide urgent medical aid to victims of natural disasters, man-made catastrophes or war, without distinction as to race, color or political belief; that MSF is a private, non-profit, international humanitarian organization whose goal is to provide medical aid to population in crisis and relies on volunteer health professionals and their commitments to help to promote humanitarian rights; that MSF receives funds from foreign countries by means of donation which are used in purchasing medical and non-medical materials and delivered to the place where there is an urgent need for a fast relief; and that it also provides shelter, food, clothing, educational livelihood opportunities to the street children in some areas of Metro Manila and pays for all the services of its office staff and field personnel who are doing these humanitarian activities. In reply, please be informed that your request cannot be granted for lack of legal basis. The VAT is a tax on the person who in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services and any person who imports goods. However, the value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. ( Section 105, Tax Code of 1997 ) If the cost of the VAT is shifted or passed on to the buyer as part of the seller's invoice billing, it is not a tax on the buyer. In the hands of the buyer, it loses the character of a tax and is treated as a mere expense or part of the purchase price. SCEHaD ". . . the persons liable for the payment of the value-added tax are not the buyers/purchasers but the sellers/importers of goods and those performing services for a fee. However, since the value-added tax is an indirect tax, it can be shifted to the customer. Once shifted to the customer as addition to the cost of goods sold, it is no longer a tax but an additional cost which the customer has to pay in order to obtain the goods. (Philippine Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967) Very truly yours, Commissioner of Internal Revenue By. (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group