BIR Ruling [DA-056-01]

April 2, 2001 BIR RULING [DA-056-01] Island Commodities Traders, Inc . (ICT) 12th Floor, The Columbia Tower Ortigas Avenue, Mandaluyong City Attention: Ms . Jennifer A . Bague GM-Finance & Administration Gentlemen : This refers to your letters dated September 14, and October 10, 2000 requesting that your sale of service is subject to VAT at 0%. It is represented that Island Commodities Traders, Inc. (ICT) is an international trading corporation representing foreign manufacturers engaged in the supply of ferrous and non-ferrous metals, organic and in-organic chemicals, fertilizers, minerals, ores and engineering; and that you receive US dollars from foreign manufacturers as indent commission for services rendered in soliciting sales orders. In reply, please be informed that your services, out of which you are paid in foreign currency, are essentially rendered in the Philippines. Pursuant to Section 108 of the Tax Code of 1997, there is levied, assessed and collected a value-added tax equivalent to 10% of gross receipts derived from the sale or exchange of services performed in the Philippines. The fact that your services will be paid in foreign currency by non-residents does not operate to entitle such locally rendered service to zero-rating. To be accorded the benefit of zero-rating the goods, property or services must be destined to be used or consumed abroad because our VAT law is basically a consumption type VAT system and follows the Destination Principle or Cross-Border Doctrine. (VAT Ruling No. 031-99) Such being the case, ICT remains subject to 10% VAT. Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group