January 15, 1996

REVENUE MEMORANDUM CIRCULAR NO. 07-96

SUBJECT

:
Clarification of Issues Affecting the Hotel and Restaurant Industry, Under
Republic Act No. 7716, Otherwise Known as the "Expanded VAT Law."

TO

All Internal Revenue Offices and Others Concerned.

Q-1: Who are the persons or entities engaged in the hotel and restaurant business subject to
VAT beginning January 1, 1996?
A-1: The following persons or entities engaged in the hotel and restaurant business are subject
to VAT beginning January 1, 1996:
1.
Proprietors, operators or keepers of hotels, motels, resthouses, pension houses,
inns, apartelles and resorts;
2.
places;

Proprietors or operators of restaurants, refreshment parlors, cafes and other eating

3.

Proprietors or operators of bars and clubs;

4.

Caterers;

5.
Non-stock, non-profit organizations, government-owned and controlled corporations
and cooperatives engaged in the hotel and restaurant business; and
6.
Q-2:

Other similar establishments.

Who shall register as VAT taxpayers?

A-2: Those whose taxable gross receipts for any 12 month period exceed P500,000.00 shall
register as VAT taxpayers.
Q-3:

Who shall register as NON-VAT taxpayers?

A-3: Those whose gross receipts do not exceed P500,000.00 for any 12 month period shall
register as NON-VAT taxpayers.
Q-4: What is the basis in the computation of VAT payable on transaction of hotel and restaurant
industry?
A-4: The basis in the computation of VAT payable on transactions of hotel and restaurant
industry shall be the gross receipts on sale of services.
Q-5:

What is the "gross receipts" in the case of hotel and restaurant proprietors or operators?

A-5: The term "gross receipts" in the case of hotel and restaurant operators shall include,
among others, charges for rooms, laundry and valet services, food and beverages consumption,
corkage, handling charges for providing telephone, telex, cable, or fax services, cake shop sales,
lease to concessionaires, compensation and other services fees. The said "gross receipts",
however, shall not include the following:
a.

Service charges billed separately and actually distributed to waiters and employees;

b.
Actual cost of long distance and overseas telephone calls, fax, cable, telex and
charges of the telecommunication companies collected by the establishment from the
customers/clients for the concerned telecommunication companies, such as PLDT which
are earmarked for payment for the latter;

Q-6:

c.

VAT passed on to customers; and

d.

Local taxes charged.

What is the basis for the presumptive input tax of the hotel and restaurant industry?

A-6: The basis for the 8% presumptive input tax credit shall be the value of the inventory of
goods, materials and supplies for sale or for use in business as of December 31, 1995, except
those goods, materials for which input tax has already been claimed.
Q-7: What are the reportorial requirements to be submitted by the hotel and restaurant
operators on or before January 31, 1996 to the RDO where the principal place of business is
located?
A-7:

The following shall be submitted:

a.
Inventory of supplies and goods for sale and/or purchased for use in business as of
December 31, 1995 for purposes of presumptive input tax credit; and
b.

Inventory of unused invoices/receipts as of December 31, 1995.

All revenue officials and employees are hereby enjoined to give this Circular the widest publicity
possible.

LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue