VAT Ruling No. 089-91

November 11, 1991 VAT RULING NO. 089-91 First Data Corporation 6th Flr. Solid Mills Bldg. Dela Rosa St., Makati Metro Manila Attention: Ms . Teofista L . Sinbal Finance and Administrative Manager S i r s: This refers to your letter dated April 11, 1991 requesting confirmation on whether or not your client, International Institute for Rural Reconstruction (IIRR), is zero-rated or VAT-exempted pursuant to the tax exemption privileges it enjoys under Republic Act No. 3538 as amended by Presidential Decree No. 728. In reply thereto, please be informed that Presidential Decree No. 1955 which took effect on October 15, 1984 has withdrawn all tax and duty exemption privileges granted to private enterprises and/or persons engaged in any economic activity and for other purposes in the Philippines. Thus, the tax exemption privilege granted to IIRR under Republic Act No. 3538 as amended by Presidential Decree No. 728 is no longer applicable. Moreover, said provision cannot be invoked by IIRR to claim VAT exemption of its purchases from First Datacorp, because the exemption privileges provided therein apply only to direct taxes. VAT is an indirect tax which may be passed on by the seller to the buyer of goods and services; hence, it can be shifted by First Datacorp to IIRR as additional cost of the latter's purchases. Such being the case, International Institute for Rural Reconstruction (IIRR) is liable to the payment of the 10% Value-Added Tax added to the cost of its purchases. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue