BIR Ruling [DA-308-99]

May 19, 1999 BIR RULING [DA-308-99] Hon. Eduardo Nonato N. Joson II Administrator National Food Authority 101 E. Rodriguez Sr. Avenue Quezon City S i r : This refers to your letter dated March 1, 1999 addressed to the Secretary of Finance requesting for the possible exemption of the National Food Authority from E-VAT on its purchases intended for certain pro-poor programs of the NFA, i.e. ERAP Sari-Sari Store; ERAP Rolling, Store; and ERAP Palengke ng Bayan. It is represented that the NFA currently runs, the nationwide Enhance Retail Access for the Poor Program, otherwise known as the ERAP Sari-sari Store Program in, order to provide service to the poor by way of making basic food items available to them at affordable prices; that the food items sold to the poor cover rice, sugar, cooking oil, milk, coffee, sardines, and noodles; that, in running this activity, the NFA sells these items to accredited outlets at low prices, so that these outlets could eventually pass-on these commodities to end-users at lower than prevailing prices; that, the NFA seeks opinion whether or not it can purchase the said commodities from VAT-registered suppliers free of the 10% VAT, in order that these commodities may be distributed, to the end-users without any VAT component and thus be able to distribute the same at lower than prevailing prices. In reply, please be informed that the NFA's tax exemption privileges is provided under Section 6(d) of P.D. No. 4, as amended by P.D. 1485, the pertinent portion of which provides: " (d) Exemptions In furtherance to the effective implementation of the policy enunciated in this decree the Authority is hereby declared exempt : " i . From payment of all taxes, duties, fees, impacts, charges, costs an d restrictions to the Republic of the Philippines, its provinces, cities, municipalities, including the taxes, duties fee, imposts and other charges provided for under the Tariff and Customs Code of the Philippines, R . A . No . 1937, as amended by Presidential Decree No . 34, dated October 27, 1972, and Presidential Decree No . 69, dated November 24, 1972, and all filing, docket, and service fees, bonds and other charges or costs in any court or administrative proceedings in which the Authority may be party . " ii . From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities ; and " iii . From all duties, arrastre fees in so far as the government's share is concerned, including all charges and fees imposed under Presidential Decree No . 857, compensating taxes and advance sales taxes, wharfage fees and tonnage dues on import/export of goods required for its operations and projects . All documents or contracts executed by or in favor of the Authority shall also be exempt from the payment of documentary and science stamp taxes and registration fees : Provided, however, that this exemption shall not apply to taxes and assessments payable by persons or entities transacting business with the Authority The Authority shall likewise be exempt from the coverage of Presidential Decree No . 711 ." Accordingly, the National Food Authority is exempt from national internal revenue taxes for which it is directly liable . (BIR Ruling No. 080-86 dated June, 19, 1986). However, the value-added tax to which NFA is subject to under the given, scenario is a form of indirect tax which is not covered by, its tax exemption privilege under P.D. 4, as amended by P.D. 1485. Much as we would like to help, the granting, of indirect tax exemption is beyond the province of this Office, the jurisdiction for which pertains only to the plenary power of Congress. Such being the case, we regret to deny your request. LLphil Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue