Aquaculture Department Southeast Asian Fisheries Development Center

March 21, 2007 BIR RULING [DA-168-07] R.R. 16-2005; PD 292 Aquaculture Department Southeast Asian Fisheries Development Center Tigbaun, 5021 Iloilo, Philippines Attention: Mr. Joebert D. Toledo, A. Agri Gentlemen : This refers to your letter dated August 10, 2006 requesting for exemption from the payment of all taxes, specially the Value Added Tax, pursuant to Presidential Decree No. 292. It is represented that Southeast Asian Fisheries Development Center Aquaculture Department (SEAFDEC/AQD) is a department of an international organization, the Southeast Asian Fisheries Development Center (SEAFDEC), organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines, with Japan as the sponsoring country; that SEAFDEC/AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of the departments of SEAFDEC to be established in Iloilo for the promotion of research in aquaculture in the region; that SEAFDEC/AQD is exempted from Philippine income tax and all other taxes pursuant to PD 292; and that SEAFDEC, as an international organization enjoys immunity from local jurisdiction as enunciated in the case of SEAFDEC vs. NLRC, 206 SCRA 284-289. In reply, please be informed that Sections 1 and 2 of Presidential Decree No. 292 provide, viz: "Section 1. The provisions of existing laws, decrees or ordinances to the contrary notwithstanding, the Aquaculture Department of the Southeast Asian Fisheries Development Center shall be exempt from the payment of gift, franchise, specific, percentage, real property and all other taxes, duties and fees provided under existing laws, decrees or ordinances. This exemption shall extend to goods imported and owned by the said Aquaculture Department and to goods brought in or imported for the personal use of foreign personnel whose services are paid by the said Aquaculture Department: Provided, however, that this exemption is without prejudice to the collection of customs duties and taxes on goods or articles brought or imported into the Philippines for the use of such foreign personnel should such goods or articles subsequently sold, transferred or exchanged in the Philippines to persons or entities not entitled to exemption from said customs duties and taxes pursuant to existing laws and regulations governing the matter. Section 2. All gifts, bequests, donations and contributions which may be received by the said Aquaculture Department from any source whatsoever shall be exempt from the payment of taxes imposed under the National Internal Revenue Code and all such gifts, bequests, donations and contributions shall be considered as allowable deductions for purposes of determining the income tax payable by the donor. All funds received by the Department shall be receipted and disbursed in accordance with the Agreement establishing the Southeast Asian Fisheries Development Center and pertinent resolutions duly approved by the SEAFDEC Council. aSDCIE The Aquaculture Department of the Southeast Asian Fisheries Development Center shall be exempt from the payment of gift, franchise, specific, percentage, real property and all other taxes, duties and fees provided under existing laws, decrees or ordinances. Furthermore, Sections 4.106-5(c) and 4.108-5(b)(3) of Revenue Regulations No. 16-2005 provide: "Section 4.106-5. Zero-Rated Sales of Goods or Properties. A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these regulations. "(c) Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement. Sales of goods or property to persons or entities who are tax exempt under special laws, e.g. sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to R.A. No. 7227, sales to enterprises duly registered and accredited with the Philippine Economic Zone Authority (PEZA) or international agreements to which the Philippines is signatory, such as Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate." xxx xxx xxx "Section 4.108-5. Zero-Rated Sale of Services (b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate." On the basis of the foregoing, this Office hereby rules that the sale of goods or properties, as well as the sale of services, to SEAFDEC/AQD is subject to 0% VAT imposed under Sections 106 and 108 of the Tax Code of 1997, as amended by Republic Act No. 9337. 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