BIR Ruling

June 20, 1972 Philippine Iron Construction & Marine Works, Inc. 610 Tanduay St., Quiapo Manila Attention: Mr . N . C . Maglasang Finance Manager Gentlemen : This refers to your letter dated November 4, 1970, stating the following: "Philippine Iron Construction and Marine Works is a registered filipino-corporation with the primary purpose of engaging in, among others, and construction of vessels, tugs, watercrafts, and other structures and appurtenances which it intends to sell to other companies or for its own shipping operations. We would like to seek your opinion on the following: 1. Are its importation of materials such as mildsteel plates, engines and accessories, exempt from the payment of compensating tax, if such materials are for the construction of a vessel intended for its own shipping operation? 2. If your answer is in the affirmative, what procedures or actions should we follow in availing of the tax exemptions? 3. Suppose the same materials are intended for the construction of a vessel to be sold to other companies, what are the business taxes that will be imposed on such importation and on the sale of the vessel constructed?" In reply, I have the honor to inform you as follows: 1. Your importation of materials such as mildsteel plates, engines and accessories is not exempt from the payment of compensating tax imposed under Section 190 of the Tax Code, since according to your Articles of Incorporation, you are not engaged in activities connected with the shipping industry as a distinct taxable business. (Victorias Milling Co., Inc. vs. Commissioner of Internal Revenue, CTA Case No. 1884, Dec. 28, 1971). 2. If the same materials, engines and accessories are intended for the construction of vessels for sale to other companies, your importation thereof is subject to the 7% advance sales tax plus 25% mark-up pursuant to Section 183(b) in relation to Section 186, both of the Tax Code while your sale of the finished vessel is subject to the 7% sales tax. aisadc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue