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BIR Ruling No. 340-11 - E-Books

The document discusses a ruling on whether the sale of CD Technologies Asia, Inc. (CD-Asia) products is exempt from value-added tax (VAT) imposed under Section 109 (R) of the 1997 Tax Code. The Bureau of Internal Revenue ruled that CD-Asia's products which have been converted into electronic or digital format do not qualify for the VAT exemption for books and similar publications.

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302 views5 pages

BIR Ruling No. 340-11 - E-Books

The document discusses a ruling on whether the sale of CD Technologies Asia, Inc. (CD-Asia) products is exempt from value-added tax (VAT) imposed under Section 109 (R) of the 1997 Tax Code. The Bureau of Internal Revenue ruled that CD-Asia's products which have been converted into electronic or digital format do not qualify for the VAT exemption for books and similar publications.

Uploaded by

Ckey Ar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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September 7, 2011

BIR RULING NO. 340-11

Section 109 (R) 1997 Tax Code;


VAT Ruling No. 060-97; VAT
Ruling No. 047-99; City of Iloilo, et
al. vs. Smart Communications, Inc.
G.R. No. 167260

CD Technologies Asia, Inc.


83 Capitol Drive, Bo. Kapitolyo
Pasig City 1603

Attention: Atty. Maria Theresa G. Libunao


Vice President for Customized Client Solutions
Atty. Ma. Lourdes D. Sitaca
Vice President for Publishing and Operations

Gentlemen :

This refers to your letter dated November 3, 2009 requesting a ruling on


whether the sale of CD Technologies Asia, Inc. (CD-Asia) products is exempt
from value-added tax (VAT) imposed under Section 109 (R) of the 1997 Tax
Code, as amended.

It is represented that CD Asia is a duly registered corporation operating


under the laws of the Republic of the Philippines. It was established in April 2004
*(1) and was subsequently registered as VAT taxpayer with the Bureau of Internal
Revenue (BIR) under Tax Identification Number 003-872-096.

CD Asia's principal business is the creation of electronic publications under


its various product lines: "The Philippine Law Library", which includes the Lex
Libris series, "Legal Knowledge Titles", and "Philippine Legal Encyclopedia
Series". These titles consist of the compilation of various references, annotations
and information regarding different fields of law. The production process involves
the conversion of printed materials into electronic format, the classification,
tagging and annotation thereof, the application of a search and retrieval software
which has been customized for legal research, and the publication thereof on

Copyright 1994-2013 CD Technologies Asia, Inc. Taxation 2012 1


optical media, such as CD-ROM and DVD-ROM, and online. CD Asia publishes
two to three new titles annually. Most of its publications are updated with the
latest materials, also in digital formats, through subscription which are delivered
either quarterly, semi-annually or annually.

Based on the foregoing representations, you now request for a ruling as to


whether the sale of your publications is exempt from VAT. aEHTSc

In reply, please be informed that in VAT Ruling No. 060-97 dated


September 30, 1997 and VAT Ruling No. 047-99 dated April 12, 1999, this Office
had the occasion to rule that the term "book" for purposes of the VAT law only
applies to printed matters in hard copy. It does not, however, apply to electronic
copy of any book or publication, thus:

"CD-ROM comes within the purview of the "goods or properties",


hence, the sale thereof made in the course of trade or business of the seller
is subject to VAT pursuant to Section 99 in relation to Section 100 of the
aforesaid NIRC. An electronic copy of any publication does not come
within the purview of the terms "books, newspapers, periodicals,
magazine, review or bulletin" for the purpose of VAT exemption as
provided under Section 103(y) of the aforesaid NIRC. The said terms only
apply to printed matters in hard copy as expressly provided therein. The
term "book" has been defines as "A literary composition which is printed;
a printed composition bound in volume." (Scoville V Toland 21 Fed. Cas.
864 BLACK'S LAW DICTIONARY)

Accordingly, it does not come within the purview of the VAT


exemption provided under Section 109 (y), NIRC, as amended by RA No.
8241, and as renumbered by R.A. No. 8424 (now Sec. 109 (R) of the 1997
Tax Code), as follows:

(y) 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."

It is a governing principle in taxation that tax exemptions must be construed


in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority. In City of Iloilo, et al. vs. Smart Communications, Inc. G.R. No. 167260,
February 27, 2009, the Supreme Court held that:

"The basic principle in the construction of laws granting tax


exemptions has been very stable. As early as 1916, in the case of
Government of the Philippine Islands v. Monte de Piedad, this Court has
declared that he who claims an exemption from his share of the common
Copyright 1994-2013 CD Technologies Asia, Inc. Taxation 2012 2
burden of taxation must justify his claim by showing that the Legislature
intended to exempt him by words too plain to be beyond doubt or mistake.
This doctrine was repeated in the 1926 case of Asiatic Petroleum v.
Llanes, as well as in the case of Borja v. Commissioner of Internal
Revenue (CIR) decided in 1961. Citing American jurisprudence, the Court
stated in E. Rodriguez, Inc. v. CIR: EICScD

'The right of taxation is inherent in the State. It is a


prerogative essential to the perpetuity of the government:
and he who claims an exemption from the common burden,
must justify his claim by the clearest grant of organic or
statute law. . . When exemption is claimed, it must be
shown indubitably to exist. At the outset, every
presumption is against it. A well-founded doubt is fatal to
the claim; it is only when the terms of the concession are
too explicit to admit fairly of any other construction that the
proposition can be supported.'

In the recent case of Digital Telecommunications, Inc. v. City


Government of Batangas, et al., we adhered to the same principle when
we said:

A tax exemption cannot arise from vague inference.


. . Tax exemptions must be clear and unequivocal. A
taxpayer claiming a tax exemption must point to a specific
provision of law conferring on the taxpayer, in clear and
plain terms, exemption from a common burden. Any doubt
whether a tax exemption exists is resolved against the
taxpayer."

Based on the foregoing, CD-Asia's products which have been converted


into electronic or digital format do not come within the purview of the term "books
or any similar publication" for purposes of Section 109 (R) of the 1997 Tax Code,
as amended, hence not embraced by the VAT exemption under the said law.

This ruling is being issued on the basis of the foregoing facts as


represented. However, if upon investigation, it will be disclosed that the facts are
different, then this ruling shall be considered null and void.

Very truly yours,

(SGD.) KIM S. JACINTO-HENARES


Commissioner of Internal Revenue

Copyright 1994-2013 CD Technologies Asia, Inc. Taxation 2012 3


Copyright 1994-2013 CD Technologies Asia, Inc. Taxation 2012 4
Endnotes

1 (Popup - Popup)
* Note from the Publisher: CD Asia was established in 1994.

Copyright 1994-2013 CD Technologies Asia, Inc. Taxation 2012 5

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