BIR Ruling [DA-174-97]

April 16, 1997 BIR RULING [DA-174-97] Apparel-Tech International, Inc. Building 7505-7507 Dyess Highway Clarkfield, Pampanga Attention: Ms. Gina Ang Comptroller Gentlemen : This refers to your letters dated November 20, 1996 and January 24, 1997, requesting for a Certificate of Tax Exemption pursuant to the provisions of Section 15 of R.A. No. 7227, otherwise known as the Bases Conversion and Development Act of 1992. It is represented that Apparel-Tech International, Inc. is a domestic corporation incorporated on December 13, 1995 under SEC Registration No. AS 095-012439 with an authorized capital stock of P8M and paid-up capital of P2M; that it was duly organized for the purpose of manufacturing garments for export and is conducting business within the Clark Special Economic Zone (CSEZ) and that the company is registered with the Clark Development Corporation with Certificate of Registration (Temporary) No. 96-14 and Certificate of Tax Exemption also numbered 96-10. In reply, please be informed that Section 5 of Executive Order No. 80 authorizing the establishment of the CDC as the implementing arm of the Bases Conversion and Development Authority (BCDA) for CSEZ provides that the CSEZ shall have all the applicable incentives in the Subic Special Economic and Free Port Zone under R.A. No. 7227 and those applicable incentives granted in the Export Processing Zone, the Omnibus Investments Code of 1987, the Foreign Investment Act of 1991 and the new investments law which may hereafter be enacted. On the other hand, Section 12 (c) of the R.A. No. 7227 provides that registered enterprises within the Secured Area of the Zone as defined in Executive Order No. 97 dated June 19, 1993 shall, in lieu of local and national taxes be liable to the payment of the following, based on gross income earned: HIaTDS (1) To the National Government 3% (2) To the Local Government Units affected by the declaration of the Zone 1% (3) To the Special Development Fund to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic and other municipalities contiguous to the base areas 1% Such being the case, as a registered business enterprise conducting business within the Clark Special Economic Zone, Apparel-Tech International, Inc. shall be liable to the above-stated preferential tax rate based on its gross income earned, in lieu of local and national internal revenue taxes. It shall also be exempt from VAT on its importation of goods/articles in connection with its business activities as such. Moreover, the sale of goods by a domestic vendor in the customs territory to Apparel-Tech International, Inc. shall be considered export sales and effectively zero-rated on the part of the seller. The domestic vendor shall not impute or shift any VAT as part of the cost to be paid by Apparel-Tech International, Inc. on its purchases from the Customs Territory. It shall be understood however, that VAT registered domestic vendors in the Customs Territory shall apply for effective zero rating of their sales to Apparel-Tech International, Inc. pursuant to Revenue Regulations No. 7-95. (BIR Ruling No. 046-95 dated March 3, 1995) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: (SGD.) ALICIA L. TOMACRUZ Head Revenue Executive Assistant Director II, Legal Service