[VAT EXEMPT PRINTING PURCHASES OF COMELEC] [PROPER TREATMENT OF INPUT VAT ON VAT EXEMPT SALE IS OUTRIGHT COST OR EXPENSE]

H Co. is requesting confirmation that it is exempt from business tax on printing services to be rendered to Commission on Election (COMELEC) pursuant to Republic Act (R.A.) No. 8436, otherwise known as “An Act Authorizing COMELEC to use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises” as amended by RA No. 9369. In reply, Section 12 of R.A. No. 8436, as amended, provides that COMELEC is authorized to procure by purchase, lease, rent or other forms of acquisition, supplies, equipment, materials, software, facilities and other services, from local or foreign sources free from taxes and import duties in relation to the automated elections. Section 12 of R.A. No. 8436 clearly intended to exempt COMELEC from the 12% VAT or the 3% percentage tax on its local purchases of goods and services as well as importation of goods that will be used relative to the conduct of the May 10, 2010 elections and succeeding electoral exercises. Hence, the suppliers/sellers of goods and services to the COMELEC cannot shift or pass on any VAT or percentage tax to COMELEC on the latter’s purchases of goods and services that will be used in the elections. While the BIR confirms that COMELEC is exempt from VAT, such exemption may only be invoked by COMELEC and it does not extend to COMELEC’s suppliers with respect to the latter’s purchases and other contractual arrangements. Thus, H CO. is not entitled to the said tax exemption but shall be considered as the end-user who will bear or assume the burden of the tax (VAT or percentage tax). Consequently, input tax attributable to VAT-exempt sales to COMELEC shall not be allowed as credit against the output tax on the part of the supplier but should be treated as part of their cost or expense.  [BIR RULING NO. OT-268-21, JULY 26, 2021]

TAXABILITY OF NON-STOCK SAVINGS AND LOANS ASSOCIATIONS

B Co. is seeking confirmation whether a Non-Stock Savings and Loan Association (NSSLA) organized and operated exclusively for the mutual benefit of its members is subject to Gross Receipts Tax (GRT). In reply, the BIR cited Section 5 of the Republic Act (R.A.) No. 8367, otherwise known as “An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations.” It states that an NSSLA shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank. However, income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the 1997 Tax Code. Hence, interest earnings on deposits of members with these associations and the shares of their members from the net income shall be exempt from income tax. In addition, NSSLAs shall confine their membership to a well-defined group of persons and shall not transact business with the general public. Revenue Memorandum Circular (RMC) No. 9-2016 clarified the taxability of NSSLAs for purposes of income tax, GRT, and Documentary Stamp Tax, which provides that an NSSLA is generally subject to GRT on income derived from its operations, unless otherwise exempted under special rules. Upon scrutiny of records, B Co. showed the characteristics of an NSSLA from they obtain their funds exclusively from its members, and do not transact business with the public. Thus, B Co. is not subject to GRT for as long as the transactions made by the association do not represent the classifications of activity of a Non-bank Financial Institutions (NBFI) as defined by the law and its rules and regulations. [BIR RULING NO. 239-21, JULY 12, 2021]

CERTIFICATE OF COMPLIANCE FROM ERC IS REQUIRED FOR RE DEVELOPER TO QUALIFY FOR ZERO-RATED VAT AND REFUND UNDER EPIRA LAW

S Co. is seeking confirmation whether a renewable energy developer (RE Developer) is required to obtain a Certificate of Compliance from the Energy Regulatory Commission (ERC) for its sales to be subject to zero-rated value-added tax (VAT), and whether the sales of the RE Developer during its commissioning and testing phase can be considered a VAT zero-rated sale for the purpose of VAT refund. In reply, the BIR opined that in a VAT refund, a Certificate of Compliance is only required when the claim is anchored on Electric Power Industry Reform Act (EPIRA). Moreover, the Certificate is not mentioned under Revenue Memorandum Order (RMO) No. 47-2020 which provides the documentary requirements to be submitted by taxpayers engaged in renewable energy on claims for VAT credit/refund. On the second issue whether the sales during commissioning and testing phase can be considered a VAT zero-rated sale, the BIR clarified that as long as the power or fuel is generated through renewable sources of energy, sale is subject to zero-rated VAT regardless of the stage of operation. [BIR RULING NO. 217-21 JUNE 30, 2021]

VAT EXEMPTION OF SERVICES RENDERED TO COMELEC FOR 2019 NATIONAL AND LOCAL ELECTIONS

L Co. is requesting a confirmation ruling that its services rendered to the Commission on Elections (COMELEC) during the May 2019 elections is not subject to VAT. In reply, Section 12 of Republic Act (R.A.) No. 8436, otherwise known as “An Act Authorizing COMELEC to use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises” as amended by R.A. No. 9369, provides that COMELEC is authorized to procure by purchase, lease, rent or other forms of acquisition, supplies, equipment, materials, software, facilities and other services, from local or foreign sources free from taxes and import duties in relation to the automated elections. COMELEC is exempt from 12% VAT on its local purchases of goods and services as well as VAT on its importation of goods and services that will be used in the automated national and local elections. Thus, the suppliers/sellers of goods and services to the COMELEC cannot shift or pass on any VAT to COMELEC. However, the exemption of the COMELEC from VAT on its purchase of goods as well as its procured services are limited only to its purchases and/or importation of goods and services during the period beginning July 2018 until completion of the post-election activities and that the purchases and/or importation will be used in, or directly related to, the conduct of the May 2019 automated elections. [BIR RULING NO.VAT-216-2021, JUNE 23, 2021]

EXTENT OF VAT EXEMPTION ON PRINTING AND DELIVERY OF BOOKS FOR DEPED

S Co. is seeking conformation whether the printing and delivery of books for the Department of Education (DepED) is exempt from Value-Added Tax (VAT). As represented, the Department of Budget and Management-Procurement Service (DBM-PS) withheld 5% on their payments. In reply, the BIR cited Section 12 of Republic Act (R.A.) No. 8047, otherwise known as the “Book Publishing Industry Act” and Section 109(1)(R) of the 1997 Tax Code, provides the tax incentives to persons or entities engages in the book industry wherein books, magazines, periodicals, newspapers, including book publishing and printing, as well as distribution and circulation shall be exempt from the coverage of the expanded VAT Law. Hence, S Co. is exempt from 12% VAT on its book printing and distribution of textbooks for the DepED. Consequently, DBM-PS shall no longer withhold and remit to the BIR the 5% final withholding VAT. [BIR RULING NO. 200-21, JUNE 8, 2021]