PAYMENT OF VAT ON SECURITY SERVICES AND JANITORIAL SERVICES

PAYMENT OF VAT ON SECURITY SERVICES AND JANITORIAL SERVICES

1.       Is the security agency required to pay VAT on its gross income?

Yes. However, the vat base would only be on the agency fee and not on the entire contract. It is because the income received by the agency would also be paid to the guards as salary. The real income, which will be subject to VAT, is only the agency fee. Nevertheless, there must be a breakdown of the agency fee and portions going to the guards to avoid liability (RMC 39-2007).

2.        Security guard is exempt from VAT, correct?

Yes, security guards are exempt from VAT. The services of security guards squarely fall under the exempt transaction. This is because, in substance, the Client has the principal obligation to bear the prescribed wage rates for the security guard, and the security agency will be jointly and severally liable therefore only in the event of the Client;s failure to pay.

3.       Is the same exemption under RMC 39-2007 applies to janitorial services?

No. There is nothing in the context on RMC 39-2007 that would manifest or suggest the intention to have the RMC apply to manpower agencies, i.e., janitorial and clerical services, other than security agencies. Thus, the RMC not being applicable to manpower agencies providing for janitorial services, the basis for VAT on the janitorial contracts should be the whole contract price and not merely the administrative fee and supplies charges thereof (BIR Ruling 213-2015, 19 June 2015).

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