BIR Ruling [DA-243-05]

June 3, 2005 BIR RULING [DA-243-05] 108 (B) (2); VAT Ruling No. 010-01 Seminole International Sales 1245 Paz Street, Paco MANILA Attention: Mr. Simon Lee Proprietor Gentlemen : This refers to your letter dated October 8, 2004 requesting an opinion as to whether or not the sale of services by an indentor which is paid for in foreign currency is subject to value-added tax at zero percent rate pursuant to Section 108(B)(2) of the Tax Code of 1997. It is represented that you are an indentor of merchandise especially paper products; that you are a VAT-registered taxpayer; that you act as a broker of foreign clients wherein you are transacting business as an indentor and as such, you are receiving commissions which are paid for in foreign currencies inwardly remitted to the Philippines. In reply thereto, please be informed that Section 108(B)(2) of the Tax Code of 1997, as implemented by Section 4.102-2(b) of Revenue Regulations No. 7-95, as amended by Revenue Regulations No. 5-96, provides: "(2) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); "Services other than processing, manufacturing or repacking for other persons doing business outside the Philippines for goods which are subsequently exported, as well as services by a resident to a non-resident foreign client such as project studies, information services, engineering and architectural designs and other similar services, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP." In VAT Ruling No. 025-01 dated May 17, 2001 ,this Office ruled that ". . . the services rendered by Momentum for its mother company, Momentum Internet Ltd., a non-resident foreign client, the consideration for which is paid for in foreign currency accounted in accordance with the rules and regulations of the BSP, are subject to zero percent (0%) VAT pursuant to Section 108(B)(2) of the Tax Code of 1997. ( BIR Ruling No. 010-99 dated January 21, 1999 )" SUCH BEING THE CASE, your sale of services to foreign clients which are paid for in foreign currency and accounted for according to the rules and regulations of the BSP falls squarely within the purview of the above-quoted law and regulations. Accordingly, your opinion is hereby confirmed that the same is entitled to the benefit of the zero percent VAT under Section 108(B)(2) of the Tax Code of 1997. CDISAc 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. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group