BIR Ruling [DA-196-05]

April 21, 2005 BIR RULING [DA-196-05] 107 (A); 264-86 D & S Logistics Company Blk 2, L14, Casimiro Townhomes Habay I Bacoor, Cavite Attention: Ms. Marlene D. Deriquito Managing Partner Gentlemen : This refers to your letter dated November 4, 2004 requesting in behalf of Newtech Pulp, Inc. for value-added tax (VAT) exemption on its shipment of abaca pulp. It is represented that Shipment: 1 x 20 stc: 120 Bales Abaca Pulp TUP B/L No. HASLCE40DA40001 per S/S Nova V. 456N Commercial Invoice No. JP/1004-9, value at USD23,445.00 was exported from the Philippines to Japan as of January 30, 2004 evidenced by Export Declaration No. 012826 dated January 27, 2004; Export B/L No. HASL40CED140462 dated January 30, 2004 of the Heung-A Shipping co.,Ltd; that the Nippon Daishowa Paperboard Co.,Ltd.,ultimate user of the Abaca Pulp TUP in Japan start using the pulp as of May 2004 and it was found out to have some insects in the bales seen by their eyes upon throwing of the pulp to the pulper in Kochi Mill; that they stop using the dais pulp due to the contamination by insects as stated in the letter dated June 17, 2004; that the return of the said Abaca Pulp TUP was effected as of October 22, 2004 as evidenced by Bill of Lading No. HASLCE40DA40001 per S/S Nova V. 456N; and that the said Abaca Pulp TUP is a Philippine article previously exported and returned without having been advanced in value or improved in condition since it was rejected by the buyer/end user. In reply, please be informed that there shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any pursuant to Section 107(A) of the Tax Code of 1997. However, due to the presence of some insects in the bales seen by the naked eyes, the contaminated abaca pulp were rejected abroad and therefore, shipped back to Philippines. Accordingly, the return shipment of the said goods/articles is not an importation, hence not subject to the value-added tax imposed under Section 107(A) of the Tax Code of 1997 (BIR Ruling No. 264-86 dated December 2, 1986). 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. aDIHTE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group