BIR Ruling [DA-330-98]

July 17, 1998 BIR RULING [DA-330-98] Sycip Gorres Velayo 6760 Ayala Avenue Makati City Attention: Atty . E . C . Alcantara and Mr . Joel L . Tan-Torres Tax Division Gentlemen : This refers to your letter dated June 17, 1998 requesting for ruling that the sale of raw materials to your client, JP-AOKI Rubber Phils., Inc. (AOKI) qualifies as a effectively zero-rated transaction pursuant to the rules prescribed under Revenue Regulation No. 7-95 and Revenue Memorandum Circular 17-96; and that in the absence of an approved application for effective zero-rating, the transaction otherwise entitled ta zero-rating shall be exempt from VAT pursuant to Revenue Regulations No. 7-95. cdt Documents submitted shows that AOKI is a domestic corporation duly organized and existing under the laws of the Philippines with business address at Blk. 2, Lot 6, Peoples Complex, Carmona, Cavite; that AOKI is duly registered with the Board of Investments under Certificate of Registration No. EP 95-176 as a pioneer enterprise for the manufacture of precision rubber products for automotive industries; and that based on the BOI Annual/Semestral Report, your client recorded an export sales exceeding seventy percent (70%) of its annual total production for the taxable years 1996 and 1997. In reply, please be informed that pursuant to Section 106(2)(a)(3) of the Tax Code of 1997, "sale of raw materials or packaging materials to export-oriented enterprises whose export sales exceed seventy percent (70%) of the total annual production" will qualify for effective zero-rating. Accordingly, since the export sales of AOKI exceed seventy percent (70%) of its total annual production, the sale of raw materials or packaging materials to AOKI will qualify for effective zero-rating. However, to avail of such privilege the VAT-registered seller should file an application and secure prior approval for effective zero-rating with the Revenue District Office having jurisdiction over its principal place of business, otherwise the said transaction shall be considered exempt from VAT pursuant to Sec. 4.107-1(d), Revenue Regulations No. 7-95. (VAT Ruling No. 015-96 dated August 7, 1996) 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, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)