VAT Ruling No. 091-89

April 3, 1989 VAT RULING NO. 091-89 The Philippine Motion Picture Producers Association, Inc. 509 Burke Building, Escolta Manila Attention: Mr . Manuel N . Nugui President Gentlemen : This refers to your letter dated February 6, 1989 requesting in behalf of the members of your association, the Philippine Motion Picture Producers Association, Inc. a ruling on the value-added tax coverage on the four (4) categories or classifications of local producers/owners of cinematographic films which are as follows: LLpr 1. Film producers/owners who sell their films to interested parties like T.V. stations distributors of videograms and other third parties; 2. Film producers/owners who rent or lease their films to theater owners and other interested parties on a flat rental basis; 3. Film producers/owners/importers who rent or lease moviehouses on a flat rental basis for the exhibition of their films; and 4. Film producers/owners/importers who share their gross sales on a percentage basis with owners or operators of moviehouses. You contend that while the first two categories (Pars. 1 and 2) of film producers and owners are subject to the 10 percent value-added tax inasmuch as they are selling goods and services, films producers/owners/importers/distributors falling under the last two categories (Pars. 3 and 4) are not subject to the 10 percent value-added tax on the ground that there is neither sale of goods nor services, the two important factors in determining coverage of VAT; and that you are not renting out any equipment but merely exhibiting images of people, places and events not covered by VAT. In reply, please be informed that the value-added tax is imposed on the sale of goods and services. Thus, under the first two (2) categories are mentioned above, there is a sale of services (No. 1) and rental income as derived under No. 2. However, under categories No. 3 and 4, there is neither a sale of goods or services, nor rental derived. Consequently, we find your position to be proper and in order and affirm the same. However, the disposition of each film must be duly recorded in your members books of accounts for verification. aisadc Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner