VAT on toll fees

(First of two parts)

THE Supreme Court has recently upheld the validity of the value added tax (VAT) imposed on toll fees in the July 19, 2011 case of Diaz vs. Secretary of Finance.

VAT is levied, assessed, and collected, according to Section 108 of the Tax Code, on the gross receipts derived from the sale or exchange of services as well as from the use or lease of properties.

The third paragraph of Section 108 defines “sale or exchange of services” as follows:

“The phrase ‘sale or exchange of services’ means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services and lessors or distributors of cinematographic films.

These also include persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers and dealers in securities.

These also include lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes; common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines; sales of electricity by generation companies, transmission, and distribution companies.

These also include services of franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties.”

It is plain from the above that the law imposes VAT on “all kinds of services” rendered in the Philippines for a fee, including those specified in the list. (To be continued)

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