Uber settles P41.15M in unpaid VAT

Update

Global peer-to-peer ridesharing and transportation network Uber Systems Inc. has settled P41.15 million in unpaid value-added taxes during the second half of 2016, preventing the closure of its Philippine operations, the Bureau of Internal Revenue said Thursday.

In a statement, the country’s biggest tax-collection agency said that it was supposed to suspend Uber’s local business operations under its “Oplan Kandado” program following an audit of the company’s VAT compliance for the period July 1 to Dec. 31, 2016.

The investigation was made under a letter of authority issued by revenue officers of Revenue District Office No. 47, East Makati, Revenue Region No. 8, Makati City, the BIR said.

A letter of authority is an official document that empowers revenue officers to examine and scrutinize taxpayers’ books in order to determine their correct tax liabilities.

“Records of investigation showed that Uber is registered with the Land Transportation Franchising and Regulatory Board (LTFRB) as a transportation network company (TNC) with a pool of transportation network vehicle service (TNVS) operators and drivers who use its transport system to get clients/passengers for transport from one place to another. It provides pre-arranged transportation services for a fee using an internet-based application or digital platform to connect passengers with drivers using personal vehicles. It likewise ensures the compliance of its TNVS operators and drivers with the LTFRB,” the BIR noted.

“As such TNC, all of Uber’s earnings are derived from the transportation services made by its TNVS operators and drivers within the Philippines. Hence, its gross receipts from such sale of services is subject to the 12-percent VAT and not to the 3-percent common carrier’s tax,” the BIR explained.

“Although Uber religiously filed its VAT returns on time, it declared its sale of services rendered within the Philippines amounting to P413.85 million as zero-rated sales, contrary to the ‘cross border doctrine,’” the BIR said.

According to the BIR, the cross border doctrine meant that “no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority.”

“Conversely, those destined for use or consumption within the Philippines shall be imposed with the 12-percent VAT,” the BIR added.

“The act of Uber of declaring its sale of services as zero-rated and not paying the VAT due thereon is a clear violation of the Tax Code which is one of the grounds for its suspension or temporary closure. Section 115 of the Tax Code, as implemented through Revenue Memorandum Order No. 03-2009, authorizes the BIR to suspend or close the business operations of a taxpayer for a period of not less than five days for failure to: register; issue VAT official receipts or sales invoices; file correct VAT returns; or pay the correct VAT,” according to the BIR.

To avoid closure, Uber settled its unpaid VAT dues last Feb. 13.