January 15, 1996REVENUE MEMORANDUM CIRCULAR NO. 04-96SUBJECT:Clarification of Issues Affecting Media under R.A. No. 7716, otherwise known as the "Expanded VAT Law".TO:All Internal Revenue Officers and Others Concerned.Q-1Which of the various forms of media are liable to VAT?A-1a.Printb.Broadcastc.Advertisingd.PromotionQ-2Is the sale and/or importation of newspapers, books, magazines, periodicals subject to VAT?A-2No, the sale of books, magazines, periodicals, newspapers including book publishing and printing as well as its distribution and circulation, except their importation, are exempt from VAT pursuant to R.A. No. 8047. Q-3Are the gross receipts from advertising of newspaper and magazines subject to VAT?A-3Yes, the gross receipts from advertising of newspapers and magazines are subject to VAT.Q-4What is the basis of computing VAT in the case of media?A-4The basis for computing VAT payable on transactions of media shall be the gross receipts. To illustrate:Assume that an advertiser pays an advertising agency the amount of P100,000 to create a commercial and run the same on print and/or broadcast media with the advertising agency getting 15% of such amount as commission/service fee.Assumption 1:(a)The advertising agency issues a VAT official receipt to the advertiser for P15,000 and a provisional receipt for the P85,000 as share of the Media. The VAT payable by the advertising agency shall be computed as follows:

Commission/Service Fee15% x P100,000)P15,000.00Output VAT (1/11 of P15,000)P1,363.63Less:Applicable Input VAT Credits(x x x)VAT PayableP x x x(b)The print/broadcast media issues a VAT official receipt to the advertiser for P85,000. The VAT shall be computed as follows:

Amount received for AdvertisingSpace, Radio/TV Spots/Airtime(85% x P100,000)P85,000.00Output VAT (1/11 of P85,000)P7,727.27Less:Applicable Input VAT Credits(x x x)VAT PayableP x x xAssumption 2:The advertising agency issues a VAT official receipt to the advertiser for the total amount of P100,000 and Media issues a VAT official receipt for P85,000.00 to the advertising agency for the payment of the advertisementa)The VAT payable by the advertising agency shall be computed as follows:Gross ReceiptsP100,000.00Output VAT (1/11 of P100,000)P9,090.90Less:Applicable Input VAT Credits(1/11 of P85,000)(7,727.27)VAT PayableP1,363.63(b)The VAT payable by the print/broadcast media, using a VAT invoice issued in the name of the advertising agency, shall be computed as follows:Amount received for advertisingspace, Radio/TV Spots/Airtime(85% x P100,000)P85,000.00Output VAT (1/11 of P85,000)P7,727.27Less:Applicable Input VAT Credits(x x x)VAT Payable by MediaP x x xQ-5Are importations by broadcasting and television stations subject to VAT?A-5The importation of radio and television equipment, spare parts, and allied technical and program materials to be used exclusively by broadcasting and television stations in their broadcast operations under Presidential Decree No. 1362 shall be subject to VAT including the value of the radio or television time used by the Government set off against whatever duties and taxes which the radio or television station should have paid.Q-6Where should media entities register?A-6The head or main office and branches are required to register and pay the annual registration fee of P1,000 each with the Revenue District Office (RDO) where said head or main office and branches are located: Q-7Are radio and TV broadcasters required to register? How about the payment of P1,000.00 registration fee?A-7Yes, radio and TV broadcasters, as well as actors, actresses, talents, singers and emcees, choreographers, musical, radio, movie, television and stage directors, are required to register as Non-VAT taxpayers. They will likewise pay the P1,000.00 annual registration fee. However, if there exists an employer-employee relationship, the person need not register, as he is exempt from VAT under Sec. 103. Q-8Are radio and TV broadcasters subject to VAT? When?A-8Radio and TV broadcasters will not be subject to VAT during the two-year moratorium period. After this period, they will be subject to VAT if the gross receipts from the practice of their profession exceeds P500,000.00 in any 12-month period.Q-9Are extension offices required to register without paying the annual registration fee?A-9Extension offices not generating sales such as studio or place of production are required to register without paying the annual registration fee of P1,000.00. Q-10Are relay stations required to register?A-10Relay stations which are merely transmitter structures are not required to register.Q-11Are billboards required to be registered?A-11Billboards of whatever type used in advertising are not required to be registered.Q-12(a)Who are entitled to presumptive input tax credit?(b)What is the basis of computation?(c)Are capital goods also entitled to presumptive input tax?A-12(a)Only VAT-registered persons shall be entitled to presumptive input tax credits.(b)The 8% presumptive input tax credit for media shall be computed based on the value of the inventories of goods, materials or supplies not for sale but purchased for use in business in their present condition, such as, newsprint, video films, VCR tapes, and other VAT-invoiced production materials on hand as of December 31, 1995.(c)Movable capital goods are also entitled to 8% presumptive input tax based on book value as of December 31, 1995. Q-13What special information are required of members of media on or before January 31, 1996?A-13Members of media registered as VAT taxpayers shall submit on or before January 31, 1996 to the RDO, where the principal place of business is located, the following:a.Inventory of goods, materials and supplies as of December 31, 1995 for purposes of the presumptive input tax credit;b.Inventory of unused invoices/receipts as of December 31, 1995.c.List of names of clients and the amounts of the contract price outstanding as of December 31, 1995Q-14Are services already rendered and billed before January 1, 1996, but collected thereafter subject to VAT?A-14No, these are not subject to VAT as long as these accounts are included in the special information return submitted to the BIR by the taxpayer on or before January 31, 1996. However, the same accounts shall be subject to the applicable percentage tax, if any. All revenue officials and employees are enjoined to give this Circular the widest publicity possible.

LIWAYWAY VINZONS-CHATOCommissioner of Internal Revenue