VAT Ruling No. 093-02

December 23, 2002 VAT RULING NO. 093-02 108 (B) (2) 038-2001 Sesamo, Inc. 7F Don Jacinto Building, 141 Salcedo Street, Legaspi Village Makati City Attention: Ms. Erlinda A. Yapana General Manager Gentlemen : This refers to your letter dated August 20, 2002, requesting for a reconsideration of our VAT Ruling No. 048-2002. It is represented that Sesamo, Inc. (Sesamo) is a resident corporation providing accounting services to Alitalia Linee Aeree Italiane (Alitalia Airlines);that Alitalia Airlines is a resident foreign (Italian) corporation, whose registered business operations in the Philippines carriage of passengers and goods by air was suspended beginning October 24, 1998; and that the fees for which are paid for in United States (US) Dollars, which are converted to Philippine Pesos when credited to the bank account of Sesamo. You now request for confirmation that the said services are subject to zero-percent (0%) value-added tax (VAT). In reply, please be informed that under Section 108(B)(2) of the Tax Code of 1997, as implemented by Sec. 4.102-2(b)(2) of Revenue Regulations No. 5-96, as amended by Rev. Regs. No. 6-97, services other than processing, manufacturing or repacking for goods which are subsequently exported, in order to qualify as zero-rated VAT transaction, must have been rendered to a person doing business outside the Philippines or to a non-resident foreign client, and that the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. The accounting service you rendered to Alitalia Airlines will not qualify as a zero-rated VAT transaction under Sec. 108(B)(2) of the said Tax Code because it is not rendered to a person doing business outside the Philippines nor to a non-resident foreign client. Although Alitalia suspended its registered business operations in the Philippines, it still remains to be a resident foreign corporation. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group