In 1992, the BIR issued an assessment to private respondent for deficiency VAT for taxable year 1988. Private respondent argued that the services it rendered relating to collections, consultative and other technical assistance, including functioning as an internal auditor, were on a “no-profit, reimbursement-of-cost basis only” and that it was not profit-motivated, thus not engaged in business.
Whether or not private respondent was engaged in the sale of services and thus liable to pay VAT thereon.
YES. It is immaterial whether the primary purpose of a corporation indicates that it receives payments for services rendered to its affiliates on a reimbursement-on-cost basis only, without realizing profit, for purposes of determining liability for VAT on services rendered. As long as the entity provides service for a fee, remuneration or consideration, then the service rendered is subject to VAT.