BIR Ruling [DA-102-06]

March 9, 2006 BIR RULING [DA-102-06] RMO No. 9-2000; VAT Ruling 010-2003 Cagdianao Mining Corporation 3rd Floor, BMMC Building, 143 Dela Rosa cor. Adelantado Streets, Legaspi Village, Makati City Attention: Mr. Salvador B. Zamora II President Gentlemen : This refers to your letter dated May 9, 2005 requesting exemption from the value-added tax, on your importation. It is represented that Cagdianao Mining Corporation is a VAT registered company duly registered with the Board of Investments since September 13, 1999 under the Omnibus Investments Code of 1987; that you are engaged in 100% export mining of beneficiated nickel silicate ore; that you are exempted from paying the VAT under Revenue Memorandum Order No. 9-2000; that last December 15, 2004, you opened an Irrevocable Letter of Credit with Security Bank Corporation to purchase 12 units of brand new Isuzu CXZ81KLD37 Dump Trucks to be used in your mining operations in Barangay Valencia, Cagdianao, Dinagat Island, Surigao del Norte; that you expect to receive the items soon and you are now processing the documents for the immediate release of the items in the Port of Manila; and that when you inquired from your broker, the Bureau of Customs insisted that you have to pay first the VAT then apply for reimbursement. In reply, please be informed that, as stated in our VAT Review Committee Ruling No. 010-2002, RMO No. 9-2000 does not in any way grant new tax incentives or exemptions. It simply aims to relieve BOI-registered manufacturers/producers (whose products are 100% exported) that are VAT-registered, from the tedious processes of either prior approval of the application for effectively zero-rated VAT as mandated by Section 4.107-1(d) of Revenue Regulations No. 7-95, or claiming tax refunds or credits of input taxes under Section 112 of the Tax Code of 1997, regarding their purchases of goods, properties or services from VAT-registered suppliers , by according them automatic zero-rated VAT treatment. However, as stated in our VAT Review Committee Ruling No. 003-2002, to avail of the benefits of RMO 9-2000, one of the conditions is that the supplier must be VAT-registered. Accordingly, your importation of brand new Isuzu Dump Trucks, even if they will be used exclusively for the production of beneficiated nickel silicate ore, which are 100% exported, cannot be accorded automatic zero-rated VAT treatment under RMO 9-2000 because the supplier, which is from abroad, is presumably not VAT-registered. SECATH Hence, your importation of brand new Isuzu Dump Trucks is subject to the 10% VAT based on the total value used by the Bureau of Customs in determining tariff and customs duties, excise taxes, if any, and other charges, such tax to be paid by you, the importer, prior to the release of such goods from customs custody. As to whether or not you can claim reimbursement after payment of VAT, this Office opines in the negative for lack of legal basis. Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue