2016 (Taxation) Bar Exam Questions: Question 13

[Answer/discuss the question below, or see 2016 bar exam Taxation Instructions; 2016 Labor Law Questions:   123456789101112141516171819, and 20; See also 2016 Bar Exam: Information, Discussions, Tips, Questions and Results]


BPursuant to Sec. 11 of the “Host Agreement” between the United Nations and the Philippine government, it was provided that the World Health Organization (WHO), “its assets, income and other properties shall be : a) exempt from all direct and indirect taxes.” Precision Construction Corporation (PCC) was hired to construct the WHO Medical Center in Manila. Upon completion ofthe building, the BIR assessed a 12% VAT on the gross receipts of PCC derived from the construction of the WHO building. The BIR contends that the 12% VAT is not a direct nor an indirect tax on the WHO but a tax that is primarily due from the contractor and is therefore not covered by the Host Agreement. The WHO argues that the VAT is deemed an indirect tax as PCC can shift the tax burden to it. Is the BIR correct? Explain. (5%)

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