BIR Ruling

February 6, 1975 The General Manager Food Industries, Inc. 5th Floor Prudential Bank Bldg. Ayala Ave., Makati, Rizal S i r : This refers to your letter dated December 17, 1974 stating that you are authorized by Vendo International of Kansas City, Missouri, U.S.A. to manufacture and/or assemble in the Philippines all types of vending equipment engineered and sold by Vendo International; that you are not yet in a position to fully manufacture; that with Vendo's approval, you have negotiated with Refrigeration Industries, Inc. to be your manufacturer-contractor; that a minimum of 300 is required in order to manufacture economically; that the local market for dispensers presently is approximately from 50 to 100 a year; that you have an understanding with Vendo International thru their office in Hongkong to sell the Philippine made equipment in Southeast Asia; and that all excess local production will be intended for export. cd Under the foregoing circumstances, you would like to be informed as to whether you can get a tax credit on the taxes paid on your imported components which are used in the manufacture of dispensers exported abroad. In reply, I have the honor to inform you that under the foregoing circumstances, you are considered the manufacturer of Vendo dispensing machines. As such manufacturer, you are subject to the P50.00 annual fixed tax prescribed in Section 182(A)(2) of the Tax Code, and your local sales of the said article is subject to the 7% sales tax prescribed in Section 186 of the same Code. However, your export sales of the same article is exempt from the sales tax pursuant to Section 188(e) of the Tax Code. And under the last paragraph of Section 183(b) of the same Code, any percentage tax paid on domestically manufactured or an imported raw materials used in the manufacture of your Vendo dispensing machines exported shall be credited against your other tax liabilities, provided that the sales tax paid are indicated as separate items in the invoices. In this connection, it may be stated that Refrigeration Industries, Inc., for actually manufacturing the Vendo machines for you, is considered a contractor, subject to the contractor's fixed and percentage taxes prescribed in Section 182(A)(1) and 191 of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5