VAT Ruling No. 092-90

1990 VAT RULING NO. 092-90 Lopez, Agravante & Company Certified Public Accountants Suite 502, Pacific Bank Building Ayala Avenue, Makati, Metro Manila Attention: Mr . Virgilio Santos Gentlemen : This refers to your letter dated August 12, 1989 stating that your client, G. R. Management Services, Inc., 502 Zita Building, Legaspi St., Makati, Metro Manila, is a domestic corporation organized under Philippine laws and realized the following income: 1. Management fee This is 5% to 25% of the contract price for managing talents (e.g. singers and performers), production of live and stage shows, concerts and other similar activities by negotiating and signing all the contracts for and in behalf of the singers or artists. casia 2. Production income This is realized from the balance (after deducting certain percentages for the place where the show is held and for the amusement tax for the local government unit) of the proceeds in the sale of tickets that your client undertakes for the financing of the production of live performances, concerts, stage shows and other similar activities. 3. Advertising income This is realized from your client's sale of airtime to advertisers for TV commercials. Based on the foregoing, you request a ruling on the taxability of aforecited forms of income. In reply, please be informed that for engaging in managing talents, your client is engaged in the sale of service (received by your client) pursuant to Section 102(a) of the Tax Code, as amended by Executive Order No. 273. On the other hand, for financing the production of live performances, concerts, stage shows and similar activities through ticket sale your client is not engaged in the sale of service; hence, its so-called production income, is not subject to VAT. However, it is subject to the individual or corporate income tax as the case may be, under Section 21 or 24 of the Tax Code. With respect to your client's buying of T.V. air time and selling the same to various T.V. advertisers, it is neither rendering any service nor engaging in the sale of goods which under Sec. 2 (p) of RR 5-87 refers only to movable or tangible goods. Accordingly, as T.V. air time is an intangible property, the so-called advertising income derived from buying and selling the same is not subject to VAT. (BIR Ruling No. 184-88) LexLib Very truly yours, JOSE U. ONG Commissioner of Internal Revenue