BIR Ruling [DA-203-05]

April 21, 2005 BIR RULING [DA-203-05] Section 109 (k) DA-022-2003 LDP Farms Food Corporation Perez Park Subd., Brgy. Bolasi, San Fabian Pangasinan Attention: Mr. Benjamin Q. Lolim President/Gen. Manager Gentlemen : This refers to your letter dated January 7, 2005 requesting exemption from the value-added tax. It is represented that LDP Farms Food Corporation is a domestic corporation registered with the Securities and Exchange Commission with registration no. CS200300171 dated January 29, 2003; that you are engaged in the toll processing or dressing of broiler chicken which starts from the receiving of live broilers from the contract growers of San Miguel Foods, Inc.; that under your toll processing agreement with San Miguel Foods, Inc., LDP Farms Food Corporation will supply the labor and services needed, i.e., land, building, equipment, materials, electricity, water and other expenses, while San Miguel Foods, Inc. will provide the live broilers and packaging materials; that the contractor (LDP Farms Food Corporation) will be paid on a per broiler dressed basis; and that you invoke BIR Ruling No. 127-95 dated August 25, 1995 and 028-2000 dated July 28, 2000. In reply please be informed that this Office had the occasion to rule on the matter when it said in VAT Ruling No. 061-97 dated October 10, 1997, reiterating BIR Ruling No. 127-95 dated August 25, 4995, that ". . . agricultural contract growers, referring to those persons producing for others poultry, livestock or other agricultural and marine food products in their original state, are exempt from VAT. In this case, contract growing described as receiving day-old chicken/broilers, sorting, fumigating, sexing of day-old broilers and growing into marketable chicken, and toll dressing described as a package services including receiving live broilers from contract growers, weighing, killing, dressing, delivery, cut-ups and packing come within the purview of services of agricultural contract growers which are exempt from VAT pursuant to Section 103(k) of the Tax Code, as amended." "In view of the foregoing, we hereby confirm . . . that contract growing and toll dressing by agricultural contract growers are exempt from VAT." IDcHCS Considering that you are on all fours with the above-cited cases, this Office holds that fees paid to you for the toll dressing services shall be exempt from value added tax pursuant to Section 109(k) of the Tax Code of 1997. This ruling is being issued on the basis of foregoing facts as represented. However, if upon investigation it shall 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group