COMMENTARY
BY AMADO MACASAET
CTA says mall owners exempt
from VAT on cinema tickets
BY DENNIS GADIL
Mall owners operating their own cinemas are exempt from paying the value-added tax (VAT) by paying only the amusement tax imposed by local government units (LGUs) on gross ticket sales, a recent Court of Tax Appeals (CTA) ruling said.
The CTA also said the national government, through its revenue agent, the Bureau of Internal Revenue (BIR), is precluded from imposing VAT on the gross receipts of cinema or theater operators.
The tax court said RA 7160 or the Local Government Code affirmed the right of local government units (LGUs) to impose the local tax as the law retained the provision on the amusement tax on proprietors and operators of cinemas to reflect the "legislature’s intention to impose only one form of tax" for such kind of business.
The CTA said this was further affirmed by the House of Representatives through a resolution excluding cinema operators from VAT.
"In this connection, Congress resolved that there should only be one business tax applicable to theaters and movie houses, same being the top rate of 30 percent amusement tax imposed by cities and provinces under the LGC of 1991," it said.
The CTA ruling stemmed from a case filed by Ayala Land Inc. (ALI) against the BIR for finding the former liable for P103.3 million in VAT taxes from the sales of cinema tickets covering the period of 2003.
The BIR demanded payments in 2004.
ALI contended that it was already paying amusement tax to the local government unit, which has jurisdiction over their cinemas, and even pointed out the preclusion of the national government from imposing VAT on ticket sales.
The CTA ruled in favor of ALI, which could also be invoked by other big mall operators.
The national government’s right to subject cinema operators to amusement tax was removed with the passage of Presidential Decree 231 or known as the Local Tax Code and consequently transfers this right to LGUs.
This was further affirmed with the enactment of the LGC or RA 7160 in 1991, the CTA said.
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