VAT Ruling No. 111-90

May 14, 1990 VAT RULING NO. 111-90 Philippine Shipyard and Engineering Corp. (PHILSECO) PPL Bldg., United Nations Avenue Manila Attention: Mr . Leon J . Panlilio Senior Manager Management Services Office S i r s : This refers to your letter of September 5, 1989 inquiring if the ship repair services of your sub-contractors are exempt from the Value-Added Tax. This is made on the premise that your company is VAT exempt by virtue of BIR Ruling 354-87 in relation to the EPZA law and Section 103(u) of the Tax Code as amended. In reply, thereto, please be informed that the tax exemption privilege granted to your company as an EPZA-registered enterprise and pursuant to the aforecited laws and rulings is limited only to the taxes to which you are directly liable as a contractor and not to the taxes that are passed on to you by your suppliers of goods and services. Thus even if your contracting services are VAT-exempt, it does not follow that your subcontractors are also exempt or zero-rated. Such being the case, the ship repair services of the independent contractors that you hired are subject to the 10% VAT pursuant to Section 102(a) of the Tax Code as amended. Please be guided accordingly. LLjur Very truly yours, JOSE U. ONG Commissioner of Internal Revenue