BIR Ruling [DA-250-00]

May 22, 2000 BIR RULING [DA-250-00] Sec. 1300 (D); RR 1-97 RN 235-90; 442-88 DA-250-2000 Fortune Tobacco Corporation Parang, Marikina Metro Manila Attention: Mr . Peter Y. Ong Senior VP for Production Gentlemen : This refers to your letter dated February 21, 2000 requesting for special permission to sell and deliver free of tax, to Philippine Airlines Corporation some cigarettes for the consumption of the passengers of the latter during international flights, in accordance with existing laws or regulations, to wit: Quantity Brand Tax Rate 44 css. Hope Lux M 100 Tax Free It is represented that the subject cigarettes will be sold to flight passengers and consumed beyond Philippine territorial jurisdiction; that the sales volume in this regard may not be quite significant or profitable but you just want to contribute in your humble way the promotion of Philippine products to bolster sales and perhaps to gain, as well, some foreign exchange in the process; that you are of opinion that this kind of transaction is considered as export sale and, therefore, tax free; that this situation could be considered as similar to that of La Flor de la Isabela (TABACALERA) which was allowed to sell and deliver its world famous cigars, free of tax, to duty free shops operating inside the Manila International Airport which the latter would sell to outbound passengers; that considering the transaction to be tax-free, you manifest your willingness to answer and pay all taxes that may be due on such cigarettes in the event of deviation, diversion, loss and/or non-delivery of same as intended; and that to guarantee the payment of excise and value-added taxes that will be payable on the above-mentioned cigarettes, your continuing Exporter's Surety Bond Nos. 00268 and 00269 issued by Alliedbankers Insurance Corporation in the amount of Ten Million Pesos (P10,000,000.00) is on file with the BIR's Bond Section, General Service Division under Bond Registry No. 2495-87 dated March 26, 1987. In reply, please be informed that pursuant to Section 130(D) of the 1997 Tax Code, when goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, an excise tax paid thereon shall be credited or refunded upon submission of proof of actual exportation and receipt of the corresponding foreign exchange payment. It appearing that the cigarettes in question, i.e., Hope Lux M 100 will be sold to flight passengers and consumed beyond Philippine territorial jurisdiction, this Office is of the opinion as it hereby holds that the transaction is considered export sale. In similar manner that the government allows sale and delivery to duty free shops operating inside the Manila International Airport for the purpose of reselling the same to outbound passenger, tax and duty free, that sales to international flight, i.e, PAL in the instant case, be sold and delivered tax and duty free. Considering further, that the cigarettes are to be sold and/or consumed during international flights the same should be categorized as export sale. (BIR Nos. 442-88 dated September 15, 1988 & 235-90 dated December 18, 1990.) Such being the case and considering that Fortune Tobacco Corporation has continuing Exporter's Surety Bond Nos. 00268 and 00269 issued by Alliedbankers Insurance Corporation in the amount of Ten Million Pesos (P10,000,000.00) presently on file with the BIR's Bond Section, General Service Division under Bond Registry No. 2495-87 dated March 26, 1987 which is being required under Section 7(b) of Revenue Regulations No. 1-97 in the case of export sale, this Office is of the opinion as it hereby holds that it may sell and deliver, free of tax, to the Philippine Airlines Corporation, the said 44 cases of Hope Lux M 100 for the consumption of the passengers during international flights. This ruling is being issued on the basis of the foregoing fact as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. LexLib Very truly yours, (SGD.) ROMEO S. PANGANIBAN Deputy Commissioner Operations Group (Officer-in-Charge)