VAT Ruling No. 099-90

May 3, 1990 VAT RULING NO. 099-90 Cruz & Feliciano Law Office 3rd Floor, Feliciano Building 7426 Santillan Street, Makati Metro Manila Attention: Miss Myrna Cruz-Feliciano Gentlemen : This refers to your letter dated August 9, 1989 citing BIR Ruling No. 071-89 dated April 12, 1989 wherein this Office ruled that engaging in a physical fitness program, maintaining physical fitness equipment and facilities, and giving instructions to members on how to use the different equipment and facilities to attain physical fitness in exchange for monthly membership fees and a one-time entrance fee, are activities that do not constitute sale of services within the purview of Section 102(a) of the Tax Code. Thus, a corporation engaged in these activities is not subject to VAT imposed under Section 102 of the Tax Code although it is still subject to income tax under Section 24(a) thereof. cdt In relation thereto, you now seek clarification if the same ruling will apply to your client, Behavior Modification Inc. (BMI), a stock corporation offering slimming and behavior modification programs for physical fitness to its customers where: (1) in exchange for monthly membership fees and one-time entrance fees from clients/members, the facilities of the firm such as the gym, gym equipments, sauna, etc. are made available to them after they are taught on the use thereof; (2) in exchange for a fee, members/clients are given instruction on nutrition and diet under medical and nutritional supervision; (3) if clients so desire, they may, for a separate fee, avail of the firm's other services such as body massage, facial and other services. In reply, please be informed that all the above-mentioned activities constitute sales of service within the purview of Section 102(a) of the Tax Code, as implemented by Section 2(j) of Revenue Regulations No. 5-87. Accordingly, your said client (BMI) is subject to the value-added tax imposed under Section 102 of the Tax Code, as amended. This finds support in VAT Ruling No. 059-89 (March 15, 1989). In addition to this tax, your client, as a stock corporation, is also subject to the corporate income tax under Section 24(a) of the same Code. This modifies BIR Ruling No. 071-89 dated April 12, 1989. cdll Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner