March 28, 1996REVENUE MEMORANDUM CIRCULAR NO. 23-96SUBJECT:VAT on rental payable to non-resident foreign corporation or owners for the use or lease of properties in the Philippines.TO:All internal revenue officers and others concerned.In BIR ruling No. 161-95 dated October 23, 1995, it was ruled that payments for rental of tangible personal (movable) property, e.g., aircrafts, to a non-resident foreign corporation are not subject to the value-added tax imposed under Section 102 of the Tax Code, as amended, on the ground that non-resident foreign corporations are not covered by our VAT law. However, this is not true anymore in the light of Section 4.102-1(a) of Revenue Regulations No. 7-95 implementing Section 102(a) of the Tax Code, as amended by R.A. No. 7716, which provides that the use or lease of property, whether personal or real, shall be subject to VAT regardless of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines.In view of the foregoing, that portion of the said BIR Ruling No. 161-95 holding that payments for rental of tangible personal (movable) property to a non-resident foreign corporation are not subject to VAT is hereby revoked. The VAT on rental and/or royalties payable to non-resident foreign corporations or owners for the use or lease of properties in the Philippines shall be based on the contract price agreed upon by the licensor and the licensee. The licensee shall be responsible for the payment of VAT on such rentals in behalf of the non-resident foreign corporation or owner by filing a separate VAT declaration/return which shall be sufficient evidence in claiming input tax credit by the licensee. (Sec. 4.102-1(b), Revenue Regulations No. 7-95)All internal revenue officers and others concerned are hereby enjoined to be guided accordingly and to give this circular as wide a publicity as possible.LIWAYWAY VINZONS-CHATOCommissioner of Internal Revenue