BIR Ruling [DA-139-06]

March 17, 2006 BIR RULING [DA-139-06] 108 (B) (4); 164-90 Cargo Safeway, Inc . Seaborne Building 4203 R. Magsaysay Blvd. Corner Sociego Street Sta. Mesa, Metro Manila Attention: Mr. Roger Laput Comptroller Gentlemen : This refers to your letter dated August 9, 2004 requesting for a ruling that sale of services paid for in foreign currency, remitted inwardly to the Philippines and accounted for in accordance with the rules and regulation of Bangko Sentral ng Pilipinas (BSP) qualifies as a VAT zero-rated transaction pursuant to Section 108(B)(4) of the Tax Code of 1997. It is represented that Cargo Safeway, Inc. is a manning agent with Securities and Exchange Commission Registration No. 91581 dated March 3, 1980; that its primary purposes are as follows: a) To engage generally in maritime commerce and navigation in the carriage and transportation of passengers, freight, mails, property, products, goods and merchandise of every kind and description by water upon the oceans, seas, sounds, lakes, rivers, canals, bays, harbors, and other waterways, between such ports and other ports throughout the world or foreign, by means of ships, vessels, tugs, barges, lighters, boats, hydrofoils, or other watercrafts used in the business of water transportation, including the owning, purchase, sale, mortgage, lease, charter, operation, or disposition of such ships, vessels, tugs, barges, lighters, boats, hydrofoils, or other watercrafts; CAScIH b) To carry on a general coastwise and/or overseas shipping agencies, to charter, for other ocean-going and/or coastwise vessel of any class, undertake, deal in, carry on, manage, develop, make contract for the business of ocean-going and/or coastwise shipping agency abroad, establish and maintain shipping services of any class and generally to carry on the business of agents, and/or charterers' agent for others or under any form of lawful combination with other parties, and the recruitment of seamen in the Philippines for domestic employment and abroad, land recruitment for overseas and ship-chandler business. that Cargo Safeway, Inc. is accredited with the Philippine Overseas Employment Agency with Serial No. 01928; and that its sales of services are paid for in foreign currency, remitted inwardly to the Philippines and accounted for in accordance with the rules and regulation of the BSP. In reply, please be informed that Section 108(B)(4) of the Tax Code of 1997, as amended by R.A. No. 9337 provides, viz: "SEC. 108. Value-added Tax on the Sale of Services and Use or Lease of Properties . (B) Transactions Subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (4) Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof;" AacCHD Accordingly, your sale of services to persons engaged exclusively in international shipping, the consideration of which is paid for in foreign currency, remitted inwardly to the Philippines and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas, shall be subject to VAT of 0% pursuant to Section 108(B)(4) of the Tax Code of 1997. (BIR Ruling No. 164-90 dated September 3, 1990) 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