BIR Ruling [DA-103-98]

March 25, 1998 BIR RULING [DA-103-98] Daima Shipping Corporation Port Area, Ozamis City Attention: Engr . Mariano Cesar J . Go President Gentlemen : This refers to your letters dated January 28, 1998 and March 20, 1998 offering to settle your value-added tax (VAT) liability amounting to P4,298,046.00 on your importation of one (1) unit second-hand steel hull motor vessel with a gross tonnage of 330.00 tons, which vessel is now in customs custody after paying P1,000,000.00 before said release and the balance shall be paid on or before October 31, 1998, which settlement shall be inclusive of surcharge and interest computed as follows: LibLex Total VAT Liability P4,298,046.00 Less: Down-Payment 1,000,000.00 Balance VAT Liability P3,298,046.00 25% surcharge 824,511.50 20% interest for 6 mos. computed from the date of release of vessel 329,804.60 Total P4,452,362.10 ========== It is represented that you are a BOI-registered expanding operator of inter-island shipping with Certificate of Registration No. X 97-008 dated November 28, 1997 on a non-pioneer status with pioneer incentives under E.O. No. 226, that you have just conducted your business operations for about one (1) year now that have improved a lot the quality of ferry service in Mukas Kolambugan, Lanao del Norte and Ozamis City; that to further improve your service, you imported the aforementioned motor vessel from Japan; that you secured a loan from DBP for the purpose; that your loan application was however, processed and granted before the currency crisis that beset the country, but the actual importation and/or payment of the vessel in Japan was already at the height of the crisis; that as a consequence, you have to pay a higher value for the vessel than what has been projected because you have to pay it in Yen and the Peso dropped is value as against the Yen; that the loan you secured from DBP is barely enough to pay the value of the vessel and nothing was left to pay the other necessary expenses for the importation including taxes; that while you were granted incentives, you are still required to pay 3% duly and the 10% VAT; that since you have just conducted your business operations, your cash position cannot settle your VAT liability unless you can use the said vessel to augment your cash position; and that the said mode of payment was accepted informally by this Office in the presence of one of our Technical Assistants. In reply, please be informed that in view of the foregoing circumstances, this Office hereby accepts your offer to settle the balance of your VAT liability on or before October 31, 1998 in the amount of P4,452,362.10 (inclusive of surcharge and interest) after paying the P1,000,000.00 down-payment before the release date as well as your request to put up a surety bond to guarantee the payment of your said VAT liability adding the surcharge and interest thereto. Moreover, the imposition of surcharge and interest shall commence from the date of release of subject vessel from customs custody (Section 107 of the Tax Code of 1997). Finally, you are requested to submit to our General Services Division, 8th Floor, National Office Bldg., a surety bond in the amount of P4,452,362.10 (inclusive of surcharge and interest) to answer for your said tax liability. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue