BIR Ruling [DA-203-97]

May 14, 1997 BIR RULING [DA-203-97] GRM Ecozones Storage, Inc. Unit P, Q & R Columbia Complex Bldg. 707 Ninoy Aquino Ave., Paraaque Metro Manila Attention: Mr . Rodrigo A . Anabu Director Gentlemen : This refers to your letter dated April 22, 1997 requesting in effect for a ruling that the sale of goods and services to GRM Ecozones Storage, Inc. shall be effectively Zero Rated. LexLib Documents submitted to this Office disclosed that GRM Ecozone Storage, Inc. is a newly organized company duly registered with the Securities and Exchange Commission (SEC) on January 29, 1997; and that its application for registration as an ecozone facilities enterprise engaged in the establishment of warehousing and storage for the production materials and supplies of Intel Technology Phils., Inc. at the Gateway Business Park Export Processing Zone was approved on February 27, 1997 pursuant to PEZA Board Resolution No. 97-054. In reply, please be informed that under Section 24 of Republic Act No. 7916, otherwise known as the Special Economic Zone Act of 1993, business and enterprises within the ECOZONE as defined in Section 5 thereof shall, in lieu of paying local and national taxes, be liable to the payment of the five percent (5%) preferential tax rate based on the gross income earned and distributed as follows: (1) three percent (3%) to the national government; (2) one percent (1%) to the local government units affected by the declaration of the ECOZONE; and (3) one percent (1%) for the establishment of a development fund to be utilized for the development of municipalities outside and contiguous to each ECOZONE. Section 100 (a) and Section 102 (a) of the Tax Code, as amended by R.A. No. 7716 and as further amended by R.A. No. 8241, and as implemented by Revenue Regulations Nos. 7-95 and 6-97, respectively, provides that sale of goods and services to persons or entities whose exemption under special laws, (e.g. duly registered and accredited enterprises of the PEZA under R.A. No. 7916) or international agreements to which the Philippines is a signatory effectively subjects the supply of such goods and services to zero rate. Such being the case and since R.A. No. 7916 is a special law which grants exemptions from the national taxes to PEZA-registered business establishments operating within the ECOZONE, except payment for the preferential tax rate of 5% on gross income earned, the sale of goods and services to GRM Ecozones Storage, Inc. will qualify for effective zero-rating. It is understood, however, that the VAT-registered sellers shall apply with the Revenue District Officer concerned having jurisdiction over their principal place of business for the effective zero-rating of their sale of goods and services to PEZA-registered enterprise within the ECOZONE pursuant to Revenue Regulations No. 7-95. Without an approved application for zero-rating, the transactions otherwise entitled to zero-rating shall be considered exempt. (VAT Ruling No. 33-96 dated October 30, 1996, RSO 121-96) Very truly yours, SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)