BIR Ruling [DA-120-04]

March 16, 2004 BIR RULING [DA-120-04] Sec. 109 (d) VAT Ruling No. 008-2002 Ocean Canning Corporation Unit 304 Jollibee Center San Miguel Ave., Ortigas Center Pasig City Attention: Mr. Paul T. Candelaria President S i r : This refers to your letter dated February 12, 2004, requesting certification to the effect that your importation and sale of fishmeal to local customers is exempt from Value-Added Tax (VAT) under Section 109(d) of the Tax Code of 1997. It is represented that your company is registered with the Board of Investments (BOI) as a non-pioneer producer of canned tuna; that in the canning of tuna, portions of the raw tuna fish are removed and excluded from the canning process; that these excluded portions are considered and termed in the canning industry as fishmeal which include, among others, internal organs, black meat and fish heads; Fishmeal is steamed and crushed into powder as means of preservation for the market; that no chemicals of whatever nature are used during the process; that fishmeal is considered as feeds or ingredients in the manufacture of finished feeds for piggeries and livestocks; that Ocean Canning Corporation intends to import fishmeal from foreign canned tuna manufacturer. In reply, please be informed that Section 109(d) of the Tax Code of 1997 provides that sale or importation of fertilizers, seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets) shall be exempt from the value-added tax (VAT). The foregoing provision refers to three transactions as being exempted from VAT, namely: 1. Sale or importation of fertilizers, seeds, seedlings and fingerlings; 2. Sale or importation of fish, prawn, livestock and poultry feeds; and 3. Sale or importation of feed ingredients used in the manufacture of fish, prawn, livestock and poultry feeds. Item 2, specifically exempts the sale or importation of poultry feeds. Fishmeal per your representation is considered as feeds by itself for piggeries and livestock. Hence, it is exempt from the value-added tax. Likewise, item 3, clearly refers to ingredients used in the manufacture of animal feeds. And the terms 'ingredients' or 'feed ingredients' are defined under Republic Act No. 1556, as amended by Presidential Decree No. 7, and implemented by Administrative Order No. 35 dated September 23, 1975, as "any single article of feed or feeding stuff which enters into the composition of a ration, concentrate, or supplement." Such being the case, while the terms 'feed additives' and 'feed supplements' are not expressly mentioned in the law they still fall within the purview of the term 'feed ingredients'. It is significant to note that since the manufacture, importation, sale or distribution of feeds or feeding stuff requires prior registration and permit from the Bureau of Animal Industry (BAI) under Republic Act No. 1556, as amended by Presidential Decree No. 7, the certification on the nature and composition of the commodities/items as stated in the registration and import permit issued by BAI will govern the classification of the said items for purposes of VAT under Section 109(d) of the Tax Code of 1997. Accordingly, this ruling shall serve as authority of the Bureau of Customs to release the proposed importation which shall be in lieu of the issuance of the Application to Release Imported Goods (ATRIG). This ruling is being issued on the basis of the facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. aIcDCH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group