BIR Ruling [DA-124-05]

April 6, 2005 BIR RULING [DA-124-05] 106 (A) (2) (a) (1) VAT Ruling No. 070-2002 Honda Cars Makati, Inc. Shaw Branch Shaw Boulevard cor. Pilar Street 1552 Mandaluyong City Attention: Ms. Belinda U. Ramos Finance & Admin. Manager Gentlemen : This refers to your letter dated November 18, 2004 requesting for a ruling that the sale and shipment of two (2) units of Honda Accord to your client in Bangkok, Thailand shall be subject to zero percent (0%) rate pursuant to Section 106(A)(2)(a)(1) of the National Internal Revenue Code. It is represented that Honda Cars Shaw has a client from Bangkok, Thailand, CNY Export & Import with address at 149 151 901 Damrongratapipat, Klong Toey, Bangkok, Thailand who is ordering two (2) units of Honda Accord 2.4 VTi-L A/T amounting to P1.3M each and one (1) unit of Honda Accord 2.4 VTi amounting to P1.2M; and that you are going to ship the units to Thailand and your client are paying you through telegraphic transfer to your local bank. In reply, please be informed that Section 106(A)(2)(a)(1) which provides, to wit: "SEC. 106. Value-added Tax on Sale of Goods or Properties . (A) ... (2) [Zero-rated Sales.] The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. The term ` export sales ' means (1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement at may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" In view of the foregoing provision, the sale and actual shipment of goods by a VAT-registered person from the Philippines to a foreign country is taxable at the rate zero percent (0%) provided the same is "paid for in acceptable foreign currency or its equivalent in goods or services, and accounted or in accordance with the rules and regulations of the BSP." Considering that Honda Cars Shaw is a VAT-registered person, and that there is a sale and actual shipment of two (2) units of Honda Accord from the Philippines to Thailand, and that such sale is paid for in acceptable foreign currency, the sale of Honda Cars Shaw to CNY Export & Import shall be subject to zero percent (0%) VAT provided that the payment of CNY Export & Import to Honda Cars Shaw is accounted for in accordance with the rules and regulations of the BSP. ( VAT Ruling No. 070-2002 dated October 21, 2002 ) This ruling is being issued on the basis of the foregoing 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. aTIAES Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group