Consolidated Merchandising and Marketing Providers, Inc.

March 19, 2008 BIR RULING [DA-180-08] 108; VAT-10-2004 Consolidated Merchandising and Marketing Providers, Inc. #20 Hilario Bldg., President Avenue BF Homes, Paraaque City Attention: Mr. Caesar O. Michelena, Jr. President Gentlemen : This refers to your letter dated October 1, 2007 requesting for a ruling that the sale of dry goods to Cayman Islands is subject to Value Added Tax at the rate of zero percent. Documents submitted disclosed that Consolidated Merchandising & Marketing Providers, Inc. (CMMP) is a young company currently exporting dry food products to the Cayman Islands; that it is registered with the Securities and Exchange Commission (SEC) with registration certificate number CS200703020 dated February 28, 2007; that CMMP started as the distribution arm of La Huerta Michelena Inc., a virgin coconut oil manufacturer and an offshoot of hacienda Mapaso; that Progressive Distributions Ltd., has contracted CMMP to be its exclusive buying agent for the export of Philippine products to the Cayman Islands; and that in support of its request, it submitted the following documents: 1. letter proof of its continuing transaction abroad; 2. copy of the credit memo of its remittances abroad; 3. letter of credit from its buyer; and 4. bill of lading of its shipment. cDHAaT In reply, please be informed that Section 4.106-5 of Revenue Regulations No. 16-2005, as amended, provides viz.: SEC. 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 good, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations. The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. "Export Sales" shall mean: (1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, 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);" Accordingly, your export sales of dry goods to a foreign country, more particularly to Cayman Islands, shall be subject to VAT at the rate of zero percent (0%), it being considered a zero-rated transaction provided it complies with the other requirements such as: (a) paid for in acceptable foreign currency or its equivalent in goods and services and (b) accounted for in accordance with the rules and regulations of the BSP. Consequently, the passed on VAT (input tax) to your company by local suppliers of said dry goods to be exported may be available as tax credit or refund upon the filing of the necessary application to this Bureau. (VAT Ruling No. 10-2004 dated April 16, 2004) This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed or discovered that the facts are different, then this ruling shall be without force and effect insofar as the parties herein are concerned. DSHcTC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service