BIR Ruling [DA-223-06]

April 7, 2006 BIR RULING [DA-223-06] DA 544-04 Sim Marketing Corporation 2nd Floor JG Equity Building National Hi-Way, Landayan San Pedro, Laguna Attention: Mr. Rustico A. Bayani, Jr. President Gentlemen : This refers to your undated letter stating that SIM Marketing Corporation (SIM) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) on October 18, 1996; that SIM is a VAT-registered company engaged in the buying and selling of static films, tapes and adhesives which are imported and locally purchased from 3M Philippines, Inc., also a VAT-registered entity; that SIM is currently in the process of finalizing the rent of a Customs Bonded Warehouse (CBW 160) at First Covenant Manila Corporation (FCMC) with office address at Granville Industrial Complex, Governor's Drive, Bancal, Carmona, Cavite 4116; and that the imported goods sold by 3M Philippines, Inc. to SIM would be shipped from abroad and delivered directly to the proposed rented space at CBW No. 160, a customs bonded warehouse owned by FCMC that leased only to tenants and companies exclusively selling to customers located at PEZA Ecozone. In connection therewith, you now request for an opinion that the importation of products from 3M Philippines, Inc. which would subsequently be delivered and stored in the aforesaid customs bonded warehouse (CBW 160) is not subject to value-added tax. In reply thereto, please be informed that this Office had already occasion to rule on the matter when it said in BIR VAT Ruling No. 11-98 and later reiterated in BIR Ruling No. DA544-04 dated November 3, 2004 that ". . . the sale of goods by a VAT-registered entity is subject to the 10% value-added tax. Since Vantage and 3M Phils. are both VAT registered, their sale of goods are subject to 10% VAT unless the transaction is exempt from VAT under Section 109 or the transaction is subject to the zero-percent (0%) rate pursuant to Section 106(A)(2)(a). Thus, the sale of imported goods by 3M Phils. to Vantage, which were shipped from abroad and delivered directly to Vantage's rented space at AAI ICBW No. 180, and by which it issued an invoice inclusive of VAT, is in order. "We noted Vantage's representation that the goods sold to it by 3M Phils. are being shipped from abroad and delivered directly to Vantage rented space at AAI Logistics, Inc. ICBW No. 180. AAI Logistics Inc. is a Bureau of Customs controlled Industry-Specific Bonded Warehouse that leases only to tenants/companies exclusively selling to customers located at PEZA Ecozone and Industrial Parks. In this connection, this Office has consistently ruled that the Customs Bonded Manufacturing Warehouse is removed from the jurisdiction of the Philippine Customs Territory, hence, payments of internal revenue taxes shall be made upon withdrawal or removal from customs custody. Such being the case, this Office hereby opines that, ICBW is considered removed from Philippine customs territory. Therefore, shipment/delivery of imported goods thereto is not subject to the 10% VAT. In the instant case, the importation of products and/or supplies that are merely consigned and stored in an ICBW is not subject to 10% VAT, since by the very nature of consignment, these articles are not intended to enter Customs Territory. "Accordingly, since the goods were never introduced to Philippine Customs Territory, the sale of goods by 3M Phils. to Vantage is exempt from VAT." In the instant case, it is clear that both SIM and 3M Phils. are VAT registered taxpayers and the imported goods to be sold by the latter to the former would be shipped from abroad and delivered directly to the proposed rented space at CBW No. 160, a bonded warehouse, which is in all fours similar to the above-cited rulings. Hence, the importation is not subject to VAT, since the imported articles are never intended to enter the Customs Territory. SUCH BEING THE CASE, this Office holds that the sale of imported goods by 3M Phils. to SIM which is to be delivered directly at CBW No. 160 is EXEMPT from VAT. 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. DTSaHI Very truly yours, (SGD.) PABLO M. BASTES, JR. OIC-Head Revenue Executive Assistant Legal Service