BIR Ruling [DA-051-05]

February 2, 2005 BIR RULING [DA-051-05] Section 108 (B) (4) VAT Ruling No. 011-2000 Sycip Gorres Velayo & Co . 6760 Ayala Avenue Makati, Metro Manila Attention: Mr. Joel L. Tan-Torres Partner, Tax Division Gentlemen : This refers to your letter dated November 23, 2004, on behalf of your clients ASIAN TERMINALS, INC. (ATI) and INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. (ICTSI) requesting confirmation that the cargo handling services rendered by ATI and ICTSI to international shipping lines are subject to zero percent (0%) VAT. It is represented that ATI and ICTSI are VAT-registered domestic corporations engaged in the management, operation and development of ports and terminals. Among other services, ATI and ICTSI provide container handling, storage and related services to shipping lines engaged exclusively in international shipping. Specifically, these services are as follows: A. Tariff Charges: 1. Stevedoring 2. Arrastre 3. Checking charge (shipside delivery) 4. Roll on-Roll off (motor vehicles) 5. Miscellaneous a) Lifting of hatch covers b) Making fast and letting go lines (mooring and unmooring) c) Pier Lighting d) Reefer charges e) Bad Order survey (shoring/recouping and stripping/full container load) f) Equipment hire g) Penalty charges [standby charges (manpower and shore crane), extra labor/personnel] B. Other Charges: 1. Storage 2. Wharfage fees (based on size and status of container) 3. Empty Container Depot (ECD) charges [hustling, storage, lift on-lift off (from MICT stacking area to ECD)] In reply, please be advised that pursuant to Sec. 108 (B)(4) of the Tax Code of 1997 services rendered to vessels engaged exclusively in international shipping shall be subject to 0% VAT. EScaIT In several rulings, it was held that charges billed for the services rendered to foreign shipping lines, i.e., storage and handling, container repair, hauling, etc. paid through the local agents are subject to the value-added tax of 0% provided the person rendering the service is VAT-registered; the service is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); the charge for such service is for the account of the foreign principal and billing is made to them through the shipping agents. (VAT Ruling No. 083-88 dated April 14, 1988, VAT Ruling No. 103-99 dated October 6, 1999, VAT Ruling No. 011-00 dated February 23, 2000) In line with the above cited rulings, the services rendered by ATI and ICTSI to international shipping lines, paid in acceptable foreign currency, accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas and remitted to the local shipping agent are subject to 0% VAT. This ruling is being issued on the basis of foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group