Aranas Consunji & Barleta Law Office

January 25, 2008 BIR RULING [DA-044-08] Section 109; DA-242-07 Aranas Consunji & Barleta Law Office Unit 106 G/F Le Metropole Condominium Tordesillas Corner Dela Costa Streets, Salcedo Village, Makati City Attention: Atty. Ma. Louella M. Aranas This refers to your letter dated January 16, 2008, on behalf of your client, Jaro Development Corporation (JDC), requesting for confirmation of your opinion that the sale of meat by JDC is exempt from the 12% value-added tax (VAT). It is represented that Jaro Development Corporation (JDC) is a corporation duly registered and existing under the laws of the Philippines with business address at Aguinaldo Highway Imus, Cavite; and that JDC is engaged in the business of raising hogs and cattle and selling the various meat products on its raw state at wholesale and retail basis. Hence, your request. In reply, please be informed that Section 109 of the 1997 Tax Code, as amended by Sec. 4.109-1 of Revenue Regulations No. 16-2005, provides that: "SEC. 4.109-1. VAT-Exempt Transactions . (A) In general. "VAT-exempt transactions" refer to the sale of goods or properties and/or services and the use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases. aTEAHc The person making the exempt sale of goods, properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT. xxx xxx xxx Meat, fruit, fish, vegetables and other agricultural and marine food products classified under this paragraph shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar packaging methods. xxx xxx xxx." The above provision was applied in various rulings which states that that "ground beef, chopped and frozen, qualifies for exemption from VAT" as agricultural food product in its original state (VAT Ruling No. 073-01 dated October 16, 2001; VAT Ruling No. 064-88). In a more recent ruling, it was ruled that for as long as the agricultural and marine products ( i.e., meats, fish and chickens) are in their original state and are food for human consumption, only the sale of the above products as qualified are considered VAT exempt (BIR Ruling DA-242-07 dated April 17, 2007). Based on the foregoing discussion the sale by JDC of raw meat products, being agricultural product in its original state, shall be considered as VAT exempt under Section 109 of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different from that represented, then this ruling shall be considered null and void. TAcDHS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service