Diaz Murillo Dalupan and Company

January 15, 2008 BIR RULING [DA-012-08] RA 9480; DO-29-07; RMC 69-07 Diaz Murillo Dalupan and Company 5th Floor, Don Jacinto Bldg. Dela Rosa corner Salcedo Sts. Legaspi Village, Makati City Attention: Atty. Bethuel Tanupan Tax and Corporate Services Partner Gentlemen : This refers to your letter dated December 8, 2007 requesting on behalf of your client, Mark Sensing Philippines (MSP) for a confirmation of opinion on the applicability of Republic Act (RA) No. 9480, otherwise known as the Tax Amnesty Act of 2007 on its value-added tax (VAT) liabilities on importations made in 2005 and prior years. HSCAIT It is represented that MSP is an Ecozone Enterprise locator and with principal office at Clark Special Economic Zone (CSEZ), Clark Field, Pampanga. MSP's primary purpose is to engage in the business of operating a manufacturing plant which shall develop, manufacture, produce, import, export, promote, market, distribute, trade and sell on wholesale basis only, thermally sensitive coated and printed synthetic and natural papers and labels and generally to perform any and all acts connected with the business aforementioned or arising therefrom or incidental thereto, subject to existing laws, rules and regulations. MSP has availed of the Amnesty Program under the RA 9480. It is your opinion that RA 9480 effectively includes amnesty from VAT on importation, inasmuch as VAT is included in the enumeration of national taxes and after having paid the same under the Tax Amnesty Act, you believe that MSP is no longer liable to pay the VAT due on its importations for taxable year 2005 and prior years. In reply, please be informed that Section 3, Rule II of Department Order No. 29-07 (DO 29-07) or the Implementing Rules and Regulations of RA 9480 provides as follows: "SEC. 3. Taxes Covered. The tax amnesty shall cover all national internal revenue taxes imposed by the National Government for the taxable year 2005 and prior years, with or without assessments duly issued therefor, that have remained unpaid as of December 31, 2005." HDICSa The kinds of taxes covered by the provisions of RA 9480 were clarified in Revenue Memorandum Circular No. 69-2007, dated November 5, 2007, pertinent portion of which states: "Q-1 What type of taxes and what taxable period/s are covered by the Tax Amnesty Program under RA9480 as implemented by DO29-07? A-1 The Tax Amnesty Program (TAP) covers all national internal revenue taxes such as income tax, estate tax, donor's tax and capital gains tax, value added tax, other percentage taxes, excise taxes and documentary stamp taxes, except withholding taxes and taxes passed-on and already collected from the customers for remittance to the BIR, these taxes/funds being considered as funds held in trust for the government. . . ." It is clear from the foregoing that all national internal revenue taxes, with the exception of withholding taxes are covered by the provisions of RA 9480. This includes VAT on imported articles imposed under Section 107 of the 1997 Tax Code, as amended. To fall within the coverage of the law, what is important is that the tax subject of availment is a national internal revenue tax. Inasmuch as VAT is a national internal revenue tax, it is covered by the provisions of RA 9480. Such being the case, the immunities granted under Section 10 of the law, particularly the immunity from payment of taxes arising from failure to pay any and all internal revenue taxes for taxable year 2005 and prior years, shall be accorded to MSP subject to the condition that MSP fully complies with the provisions on availment under RA 9480. In this regard, paragraph 3, Section 6.3., Rule III of DO 29-07 provides that: "SEC. 6. Method of Availment of Tax Amnesty . . . . 1. . . . 2. . . . 3. . . . The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax Amnesty Return shall be submitted to the RDO, which shall be received only after complete payment. The completion of these requirements shall be deemed full compliance with the provisions of RA9480." EIcSTD Provided however, that MSP has completed the requirements for availment of tax amnesty, it is deemed to have fully complied with the provisions of the law. Accordingly, it is entitled to the immunities and privileges under RA 9480. Hence, MSP shall be immune from the payment of VAT on importation for taxable year 2005 and prior years. Relative thereto, Section 10 of the DO 29-07 partly provides thus: "SEC. 10. Immunities and Privileges . Taxpayers who have fully complied with the conditions under RA9480 and these rules shall be entitled to the following immunities and privileges: 1. The taxpayer shall be immune from the payments of taxes, as well as additions thereto, and the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from the failure to pay any and all internal revenue taxes year 2005 and prior years. HcTSDa 2. . . . 3. . . . The above-stated immunities and privileges shall not apply where the person failed to file a SALN and the Tax Amnesty Return, or where the amount of networth as December 31, 2005 is proven to be understated to the extent of thirty percent (30%) or more, in accordance with the provisions of Section 4 of RA9480 and Section 9; Rule IV hereof." cSICHD In view of the foregoing, this Office hereby confirms your opinion as follows: 1. The provisions of RA 9480 cover all kinds of internal revenue taxes including VAT on importation; and 2. By availing of the tax amnesty under RA 9480, MSP is immune, among others, from the payment of VAT and other national internal revenue taxes assessed on its importation for taxable year 2005 and prior years. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. TAEcSC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service