VAT Ruling No. 101-99

September 21, 1999 VAT RULING NO. 101-99 Sec. 119-056-98-101-99 Green Valley Cablevision, Inc. Maranding, Lala Lanao del Norte Attention: Engr . Joseph Joel R . Longcob RE : Request to Change from VAT to Non-VAT Status Gentlemen : This refers to your letter dated July 12, 1999 requesting the change of your registration status from VAT to non-VAT effective January, 1999. It is represented that your company, the GREEN VALLEY CABLEVISION, INC., is a legitimate cable operator in Maranding, Lala, Lanao del Norte which is a franchise grantee of a Provisional Authority to Operate Cable Television issued by the National Telecommunications Commission (NTC); that it is currently operating in the towns of Lala and Kapatagan, Lanao del Norte with an average annual gross receipts of P1,000,000.00 more or less; that when you registered with our Iligan City District Office, you were advised to register as a VAT taxpayer and to file your VAT returns regularly; that upon reading BIR VAT Ruling No. 119-000-00-056-98 dated December 2, 1998 which declared radio and/or television broadcasting companies with gross revenue of not more than Ten Million Pesos (P10,000,000.00) for the preceding year to be NOT subject to the 10% VAT but to the franchise tax of 3% pursuant to Section 119 of the Tax Code, in relation to Executive Order No. 205, it was your assumption that your Company falls squarely under the same class and should therefore claim the same benefit or privilege with equal force and effect. In connection therewith, please be informed that we confirm the applicability of BIR VAT Ruling 056-98 to your case, citing as legal basis Section 119 of the Tax Code which specifically states: "Sec. 119. Tax on Franchises. Any provisions of general or specific law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year does not exceed Ten Million Pesos (P10,000,000.00) subject to Section 236 of this Code, a tax of three percent (3%) and on electric, gas and water utilities, a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise: Provided, however, that radio and television broadcasting companies referred to in this Section shall have an option to be registered as a value-added taxpayer and pay the tax due thereon. Provided, further, That once the option is exercised, it shall not be revoked. Cable TV operation having been effectively classified by Executive Order No. 205 as a broadcast medium. Under normal circumstances, once you have exercised the option to be a VAT-registered taxpayer, the same becomes your final and irrevocable choice. However, it cannot be said that you have indeed exercised your option. It appears that at the time you first registered with our District Office, you are still confronted by a complex application of the VAT law insofar as your business is concerned. Consequently, you needed the advise of our district personnel which turned out to be erroneous. In the light of the foregoing, your company may be allowed to change its registration status from "VAT" to "Non-VAT" and pay the appropriate tax therefor provided it meets the requirements set forth in Section 119 of the Tax Code. You may therefore proceed with the application for change of status with the Revenue District Office (RDO) where your place of business is registered, following the mandate of Revenue Administrative Order No. 10-95. This ruling is based on the foregoing facts as represented. If it will be disclosed, however, in an investigation that the facts are different from what has been represented, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group