Ching Bee Trading Corporation

March 2, 2007 BIR RULING [DA-137-07] Rev. Regs. No. 30-2003; VAT Ruling No. 058-2000 Ching Bee Trading Corporation Rizal Street, 4511 Tabaco City Attention: Mr. Nelson S. Lim Vice President Gentlemen : This refers to your letter dated May 16, 2005 requesting confirmation that sellers of abaca fibers fall under the definition of agricultural suppliers. It is represented that Ching Bee Trading Corporation is engaged in the business of buying, grading and selling abaca fibers; that abaca (Musa Textilis Nee), commercially known as Manila Hemp, is indigenous to the Philippines and is the strongest among the natural fibers; that it is highly suitable for the manufacture of specialty papers, such as currency or bank notes, electrolytic condenser papers, filter papers, tea bags, meat casings, disposables, and cigarette paper and non-woven items, among others; that abaca pulp is being used for strengthening facial tissues, table napkins, diapers and recycled papers; and that you opine that Section 3 of Revenue Regulations No. 30-2003, the term "agricultural suppliers" refers to suppliers/sellers of agricultural, forest and marine food and non-food products, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. . . . " In reply, please be informed that Section 3 (S) of Revenue Regulations No. 30-2003, as amended, provides that: "The term "agricultural suppliers" refers to suppliers/sellers of agricultural, forest and marine food and non-food products, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore. "Livestock" shall include cows, bulls and calves, pigs, sheep, goats and other animals similar thereto. "Poultry" shall include fowls, ducks, geese, turkey and others similar thereto. "Marine products" shall include fish and crustaceans, such as but not limited to, eels, trout, lobsters, shrimps, prawns, oysters, mussels and clams, shells and other aquatic products." (emphasis ours) On the other hand, Section 4.109-1 (B) (1) (a) of Revenue Regulations (Rev. Regs.) No. 16-2005 provides that: "SEC. 4.109-1. VAT-Exempt Transactions. (A) Exempt transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: (a) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials thereof." As gleaned from the above provisions, sellers of abaca fiber, being a forest non-food product, are covered by the definition of agricultural suppliers of agricultural, forest and marine food and non-food products. However, with the passage of Republic Act No. 9337 effective July 1, 2005, the exemption provided for in Section 109 of the Tax Code of 1997 no longer include non-food agricultural products as among those exempt from the VAT. ESCacI Accordingly, this Office hereby rules that, while sellers of abaca fibers fall under the definition of agricultural suppliers pursuant to Section 3 (S) of Revenue Regulations No. 30-2003, they are however, now subject to VAT pursuant to Sec. 109 (a) of the Tax Code of 1997, as amended by R.A. 9337, and as implemented by Sec. 4.109-1 (B) (1) (a) of Rev. Regs. 16-2005. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service