January 15, 1996REVENUE MEMORANDUM CIRCULAR NO. 06-96SUBJECT:Clarification of Issues Affecting Operators of Taxicabs, Rent-a-Car Companies, Tourist Buses; and other Common Carriers by Land, Air and Sea Relative to their Transport of Goods or Cargoes, under Republic Act No. 7716, Otherwise Known as the "Expanded VAT Law."TO:All Internal Revenue Officers and Others Concerned.Q-1What are the common carriers subject to VAT beginning January 1, 1996?A.The following common carriers will be subject to VAT beginning January 1,1996:a.Operators of taxicabs; b.Operators of rent-a-car companies (utility cars for rent or hire driven by the lessees); c.Operators of tourist buses; d.Common carriers for transport of goods or cargoes, such as airfreight, shipping and trucking;e.Philippine Airlines (PAL) relative to domestic transport of goods or cargoes; andf.Other common carriers including Non-stock, non-profit organizations, government-owned and controlled corporations and cooperatives engaged in the transport of goods or cargoes, such as but not limited to trucks, trailers, jeepneys and the like, contracted to transport cargoes to any point in the Philippines. Q-2Who are the common carriers required to register as VAT-taxpayer and pay the P1,000 annual registration fee?A.Those whose gross receipts from the transport of cargoes for any 12 month period exceed P500,000.00 are required to register as VAT-taxpayers and pay the P1,000.00 annual registration fee. For failure to register as such, they shall still be liable for the payment of VAT plus the applicable surcharge and interest, but cannot claim credit for input taxes.Q-3Who are the common carriers to the 3% percentage tax?A.Those common carriers enumerated in No. 1 whose gross receipts in all taxable lines of business exceed P 100,000.00 but do not exceed P5000,000.00 for any 12-month period shall be liable to the 3% tax imposed under Sec. 112 of the Tax Code, as amended. Q-4Who are the common carriers exempt from the payment of VAT, the registration fee and the 3% percentage tax?A.Those common carriers enumerated in No. 1 whose gross receipts in all business lines do not exceed P100,000.00 during any 12-month period shall be exempt from the payment of VAT. They are required to register but shall be exempt from the payment of registration fee and from the 3% percentage tax imposed under Sec. 112 of the Tax Code, as amended. Q-5Who are required to register and pay the annual registration fee of P1,000.00 each with the RDO where they are located?A.In general, the following are required to register and pay the annual registration fee of P1,000.00 each with the Revenue District Officer (RDO) of the place where (a) or (b) below is located:a.Main or head office; andb.All terminals and sub-terminals generating sales.Q-6What are the allowable input tax credits to VAT registered common carriers who are also engaged in the transport of passengers?A.A VAT-registered common carrier who is also engaged in the transport of passengers shall be allowed input tax credit as follows:1.Total input tax which can be directly attributed to the transport of cargoes; and2.A ratable portion of any input tax which cannot be directly attributed to either activity.Q-7What is the basis for computing the VAT payable of VAT registered common carriers?A.The basis for computing VAT payable by the common carriers enumerated in No. 1 shall be their gross receipts from transport of cargoes.To illustrate:ABC Bus Company is operating provincial buses from Quezon to Manila and Manila to Quezon. Mr. Pedro Santos took a ride on one of the buses for which he was issued two (2) tickets: Ticket No. 001 covering his one (1) way fare of P200 and Ticket No. 002 covering his cargoes in the amount of P330. Let us suppose that ABC Bus Company has accumulated VAT-invoiced purchases, such a lubricating oil in the amount of P50.00 and wax in the amount of P50.00. How much is the VAT payable of ABC Bus Company?a)The VAT payable by ABC Bus Company shall be computed as follows:Gross receipt:PassengerP200.00Cargoes330.00TotalP530.00=======Purchases:Lubricating oilP50.00Wax50.00Total PurchasesP100.00=======

VAT payable is:VAT Output Tax (P330 x 1/11)P30.00Less: VAT Input Tax (P330 x 1/11)5.45P500VAT PayableP24.55=======(b)The common carrier's tax of 3% on the gross receipts from the passenger's fare shall be computed as follows:Passenger's fare (Quezon Manila)P200.00 x .03COMMON CARRIER'S TAX P6.00=======

Q-8Are school buses and passenger buses rented for special trips subject to VAT?A.No, school buses and passenger buses rented for special trips, such as excursions and the likes, are not subject to VAT but to the 30% common carrier's tax. Q-9Are operators of taxicabs still liable to the 3% common carrier's tax under Sec. 115 of the Tax Code?A.No, operators of taxicabs shall no longer be subject to 3% common carrier's tax imposed under Sec. 115 of the Tax Code.Q-10When are international cargo vessels subject to VAT?A.International cargo vessels, which include international airlines and freight forwarders with their own fleet and/or planes, shall be subject to VAT two years after the effectivity of RA 7716. In the meantime they shall continue to pay the 3% common carrier's tax on their gross receipts derived from outgoing freight. Q-11What is the meaning of the gross receipts?A.Gross receipts as defined under Sec. 4.102-1 of the Revenue Regulations No. 7-95, refer to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding VAT.Q-12Who are required to register without paying the annual registration fee of P1,000.00?A.The following are required to register without paying the annual registration fee of P1,000.00: a)Terminals and sub-terminals not generating sales;b)Satellite offices; andc)Garages that do not sell tickets but are merely use for the purpose of filling in gasoline or repair/maintenance work.The above offices/terminals are required to register in the RDO where said offices/terminals are located.Q-13What is the basis of the presumptive input tax credit of the transportation companies subject to VAT?A.The presumptive input tax credit of the transportation companies subject to VAT shall be based on inventories of goods, supplies, materials and spare parts not for sale but purchased for use in business on hand as of December 31, 1995 equivalent to 8% of the book value as it appears on the audited financial statements as of December 31, 1995. Q-14What is the basis of the presumptive input tax in case the supplies, materials and spare parts are used for both VAT and non-VAT operations?A.In case the supplies, materials and spare parts are used for both VAT and non-VAT operations, only a ratable portion of the value of such materials, supplies and spare parts shall be available as the basis for the presumptive input tax mentioned herein, computed by multiplying the cost of the supplies, materials and spare parts, by the proportion which the gross receipts from vatable activities bears over the total gross receipts from all operations for the preceding taxable year. Q-15After registration of the transportation company subject to VAT, what documents shall be submitted not later than January 31, 1996?A.The following shall be submitted not later than January 31, 1996 to the RDO where the registration was made: a.Inventory of goods, supplies, materials and spare parts not for sale but purchased for used in business on hand as of December 31, 1995 for purposes of the presumptive input tax credit;b.Inventory of unused receipts; andc.Schedule of receivables of VAT taxpayers under No. 1 above as of December 31, 1995. Failure to submit the schedule shall subject the collection of these receivables to VAT.Q-16Who are required to issue duly registered VAT official receipts?A.All taxpayers enumerated in A-1 above. All revenue officials and employees are hereby enjoined to give this Circular the widest publicity possible.

LIWAYWAY VINZONS-CHATOCommissioner of Internal Revenue