BIR Ruling No. 374-2020

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE Quezon City

Sec.109(1)(R) of the Tax Code of 1997 as amended

BIR Ruling Nos.133-2015 & 102-2014 VAt0374-2020

JUL 0 3 2020

No. 23, General Araneta St., Brgy. San Antonio Pasig City ASIA/PACIFIC CIRCULATION EXPONENTS,INC.

Attention: Eldridge Marvin B. Aceron

Counsel

Gentlemen:

to the provisions of Section 109 (1) (R) of the Tax Code of 1997, as amended. This refers to your letter dated May 21, 20 1 8 requesting for a V AT exemption certificate pursuant

Identification No.(TIN It is represented that Asia/Pacific Circulation Exponents, Inc. with Taxpayer's and Certificate of Registration No.

dated January 1, 1997, is a corporation duly organized and existing under the laws of the Republic of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. ; that it is registered with the National Book

Development Board (NBDB) as Commercial Book Importer, Book and/or E-Book Seller (Retail/Wholesale) per NBDB Registration No. "1: and that the primary purpose for which the corporation was incorporated is to engage in the business of general merchandising of consumer goods, such as but not limited to magazines, books, periodicals, newspapers and other printed materials; to act as distributor, or agency for distribution of publications and other

printed materials: to print, import, sell or otherwise dispose of either by wholesale or retail all

kinds of printed materials; and to establish retail stores in various locations that may become

necessary to dispose, distribute or sell printed materials.

In reply, please be informed that Section 109 (1) (R) of the National Internal Revenue

Code of 1997, as amended, provides that:

"Sec. 109. Exempt Transactions.

1 Subject to the provisions of Subsection (2) hereof, the following transactions

shall be exempt from the value added tax.

XXX XXX XXX

(R) Sale, importation, printing or publication of books and any

newspaper, magazine, review or bulletin, which appears at

regular intervals with fixed prices for subscription and sale and

which is not devoted principally to the publication of paid

advertisements:"

Valid until April 30.2019

Page 2 ASIA/PACIFIC CIRCULATION EXPONENTS,INC. VAT-03742020 JUL 0 3' 2020

Regulations (RR) No.16-2005 dated September 1,2005, to wit The above provision is being implemented by Section 4.109-1 (B(r) of Revenue

"Section 4.109-1. VAT Exempt Transactions. -

XXXXXX XXX

(B)Subject to the provisions of Section 4.109.2 hereof, the following

transactions shall be exempt from VAT:

XXX XXXXXX

(r) Sale, importation, printing or publication of books

and any newspaper, magazine, review, or bulletin

which appears at regular intervals with fixed prices

for subscription and sale and which is not devoted

principally to the publication of paid advertisements;"

In Revenue Memorandum Circular (RMC) No. 75-2012 dated November 22, 2012, this

Office made a clarification on the VAT exemption granted under Section 109 (1) (R) of the

National Internal Revenue Code of 1997, as amended, to wit:

1 A newspaper, magazine, review or bulletin must be: (1) printed or published

at regular intervals; (2) available for subscription and sale at fixed prices; and

(3) are not principally devoted to the publication of paid advertisements.

2 The terms "book", "newspaper", "magazine", "review" and "bulletin" as used

in the provision refer to printed materials in hard copies. They do not include

those in digital or electronic format or computerized versions, including but

not limited to:: e-books, e-journals, electronic copies, online library sources,

CDs and software.

Based on the foregoing, there are four (4) activities that are exempt from the coverage of

VAT, i.e., 1) sale; 2) importation; 3) printing; and 4) publication, of books, newspapers,

magazines, reviews and bulletins. Moreover, there are certain requirements that have to be met

under the above provisions, to wit: the newspaper, magazine, review or bulletin must be:

printed or published at regular intervals:

2 available for subscription and sale at fixed prices;

3 are not principally devoted to the publication of paid advertisements; and

4. printed in hard copies.

The concurrence of the aforesaid requirements must be present in order that the sale.

importation, printing and publication of books, newspapers, magazines, reviews and bulletins

will be exempt from the imposition of VAT.

In view thereof, the importation and sale of books, any newspaper, magazines, reviews

or bulletins of Asia/Pacific Circulation Exponents, Inc. books on wholesale/retail basis are

exempt from the payment of VAT and from the 3% percentage tax under Section 116, in

Page 3 ASIA/PACIFIC CIRCULATION EXPONENTS, INC. VAT-0374-2020 JUL 0 3 2020

relation to Section 109 (1) (R) of the National Internal Revenue Code of 1997, as amended, provided the aforesaid requirements are present.

activities such as the printing of brochures, bookbinding, engraving, stereotyping. electrotyping, lithographing of various reference books, trade books, journals and other literary Works, said transactions are subject to VAT, and the taxpayer shall be required to register its business as VAT business entity and must issue a separate VAT invoice / receipt therefor to record the same. Also, the sale of books, newspaper, magazines, reviews and bulletin in digital or electronic format or computerized versions, including but not limited to e-books, e-journals, electronic copies, online library services, CDs and softwares shall be subject to VAT. However, if Asia/Pacific Circulation Exponents, Inc. is engaged in other non-exempt

Moreover, VAT is an indirect tax payable by the seller and not the purchaser of goods. Being an indirect tax, it can be shifted or passed on to the buyer / purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer / customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer /

customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to

Asia/Pacific Circulation Exponents, Inc. does not make it the person directly liable and

therefore, it cannot invoke its tax exemption privilege under Section 109 (R) of the National

Internal Revenue Code of 1997, as amended, to avoid the passing on or shifting of the VAT.

Hence, its purchase of goods, properties, or services from its suppliers shall nevertheless be

subject to the 12% VAT pursuant to Section 107 of the same Code. (BIR Ruling No. 133-2015

dated April 30, 2015)

This ruling is being issued on the basis of the foregoing facts as represented. However,

if upon investigation, it will be ascertained that the facts are different, then this ruling shall be

considered as null and void.

Very truly yours,

1u3a

Commissioner of Internal Revenue CAESAR R. DULAY

035471

K- 1/18-0896