BIR Ruling [DA-083-01]

May 10, 2001 BIR RULING [DA-083-01] Mt . Samat Ferry Express, Inc . Port Capinpin, Brgy. Putting Buhangin Orion, Bataan Attention: Mr . Eduardo L . De Guzman President & Chairman of the Board Gentlemen : This refers to your letter dated March 21, 2001 claiming refund of the total amount of P9,000,000.00 representing output VAT billed by FMB Aboitiz Marine, Inc. on your purchase of two (2) units of 28m. Catarman on September 4, 2000 and February 28, 2001, respectively. You have represented that Mt . Samat Ferry Express, Inc . was registered as an Inland Water Transport under BIR Certificate of Registration No. 9RC0000039095 dated March 19, 1997; and that since you are liable to pay the percentage tax, you have no means of offsetting the said VAT output from your percentage tax liability; hence, the instant claim for refund of the said output tax billed by FMB Aboitiz Marine, Inc. In reply, please be informed that although Mt . Samat Ferry Express, Inc . is liable to the percentage tax as an Inland Water Transport, it does not mean that it is totally exempt from the operation of the VAT system. In short, while you are not subject to output VAT on gross receipts from your business operations as common carrier, you cannot claim exemption from the input VAT being passed on by suppliers of goods and services, such as FMB Aboitiz Marine, Inc.. VAT, being an indirect tax, may be shifted or passed on to the buyer of goods and services pursuant to Section 105 of the Tax Code of 1997. Once shifted, it is no longer a tax but an additional cost which the purchaser has to pay to obtain the goods and services (Philippine Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967). Accordingly, the 10% VAT charged or passed on by FMB Aboitiz Marine, Inc. in its invoice billings to you is consistent with the aforecited provision of law. We regret, therefore, that your request for refund of the aforesaid output VAT amounting to P9,000,000.00 cannot be granted for lack of legal basis. However, such output VAT passed on to you by FMB Aboitiz Marine, Inc. shall form part of the cost basis of the above-mentioned vessels that is subject to depreciation under Section 34(F) of the Tax Code of 1997. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group