BIR Ruling

December 13, 1968 The Deputy Coordinator National Export Coordinating Center Manila S i r : This refers to your letter dated November 5, 1968 requesting information on the following: "1. a) Is a manufacturer-exporter entitled to a refund or tax credit on the advance sales tax paid for imported materials to be processed locally and subsequently exported? b) If so, how does a manufacturer-exporter file a claim for the advance sales tax paid? c) Does the claim which is reimbursed to the manufacturer-exporter constitute a refund or a tax credit? "2. On the assumption that a manufacturer-exporter is in fact entitled to such privilege in the form of tax credit, is it possible to automatically grant such tax credit upon filing such claim (upon presentation of all relevant export documents), the veracity of which to be determined on a post-verification basis? (Such tax credit could be made to become valid, say 30 days after its issuance, during which twice the claim shall be verified. "3. a) Under what circumstances could a manufacturer-exporter secure at the time of importation an exemption from the payment of the advance sales tax on imported items? b) Is it possible to secure the above exemption upon the presentation of a valid firm contract which states among others the obligation of the manufacturer-exporter to export finished products which makes use of imported materials?" In reply, I have the honor to inform you as follows: Under Sections 183(b) and 190(c) of the Tax Code, imported articles to be used by the importer himself, in the manufacture or preparation of articles for consignment abroad are exempt from the advance sales or compensating tax. And under Section 188(e) of the same Code, articles shipped or exported abroad by the manufacturer or producer irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported are exempt from the sales tax. In order to be exempt under the provisions of Sections 183(b) and 190(c) of the Tax Code, the imported raw materials must be earmarked for the manufacture or preparation of articles also earmarked for export. Imported raw materials not so earmarked for export are subject to the advance sales tax, and the subsequent exportation of the articles manufacture therefrom by the importer himself will not give rise to the refund or tax credit of the advance sales tax paid thereon. In order that exemption of the raw materials may be recognized, the manufacturer must notify this Office of any such importation submitting all shipping papers connected therewith. Thereafter, an authority for the release of any such importation free from tax shall be issued by this Office upon filing by the manufacturer of a sufficient bond to answer for all taxes that may be due on the importation should it be established later on that the products manufactured out of the imported raw materials were not in fact exported. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue