BIR Ruling [DA-264-98]

June 23, 1998 BIR RULING [DA-264-98] Toyo Construction Co., Ltd. Philippine Branch 4th Floor, Princess Building 104 Esteban Street, Legaspi Village Makati City Attention: Mr . Takuro Inoue Treasurer Gentlemen : This refers to your letter dated March 25, 1998 requesting for a confirmation of your opinion that Toyo Construction Co., Ltd, a Japanese resident foreign corporation, is exempt from VAT with respect to the supply of products services in connection with its Flood Mitigation Project in Ormoc City (Phase I), a grant aid project under Japanese International Cooperation Agency (JICA). In reply, please be informed that pursuant to paragraph 6(1)(d) of the Exchange of Notes dated July 18, 1997 between the Governments of Japan and the Republic of the Philippines reading: LibLex "(1) The government of the Republic of the Philippines will take necessary measures: "xxx xxx xxx "(d) to exempt Japanese nationals from customs duties, internal taxes and other fiscal levies which may be imposed in the Republic of the Philippines with respect to the supply of products and services under the Verified Contracts; "xxx xxx xxx we hereby confirm your opinion that Toyo Construction Co., Ltd., being a Japanese national, is exempt from VAT imposed under Sections 106 (A) and 108 (A) of the Tax Code of 1997 on its supply of products and services relative to the aforementioned projects. This is so, because the Exchange of Notes between the Japanese and Philippine Governments partakes the nature of an international agreement even without legislative concurrence hence, exempt from VAT under Section 109 (q) of the same Code. (BIR, Ruling No. 341-88 dated July 20 1988; Kumagai-Gumi Co., Ltd. (Phil. Branch) vs. The Commissioner of Internal Revenue, CTA Case No. 4670, Prom. July 29, 1997) We also hereby confirm your opinion that services rendered by your VAT-registered suppliers and subcontractors relative to the Flood Mitigation Projects in Ormoc City (Phase I) shall be subject to VAT at 0% rate, pursuant to Section 108 (B)(3) of the Tax Code of 1997. It is of course understood that the said suppliers and subcontractors shall apply with the Revenue District Officer concerned for the effective zero-rating of their sales of services to Toyo Construction Co., Ltd. pursuant to Revenue Regulations No. 7-95. Without an approved application for zero-rating, the transaction shall be considered exempt. 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. LLjur Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Service)