Cabantog & Liwanag, CPAs

July 12, 2007 BIR RULING [DA-374-07] Sec. 108 (B) (4); Rev. Regs. No. 4-2007 VAT Ruling No. 21-2001 Cabantog & Liwanag, CPAs Rm. 206 Tres Hermanos Building 967 Quezon cor. Roosevelt Avenues Quezon City Attention: Neddy S. Cabantog Managing Partner Gentlemen : This refers to your letter dated June 20, 2007, requesting in behalf of your client, NDC Terminal, Inc., a ruling to the effect that the services rendered by your client to its customers international shipping companies are zero-rated sale of services pursuant to Section 12 of Revenue Regulation (RR) No. 4-2007 amending Section 4.108-5 (b) (4) of Revenue Regulations No. 16-2005. It is represented that NDC Terminal, Inc. is a domestic corporation with office address at L31-33, P2, Area 5, Dagat-dagatan, Navotas, Metro Manila; that its services to its customers international shipping companies include among others, the cleaning, repairs, washing, storage and other special services of its customers' empty international container; that your client's customers are the following: 1) Hapag Lloyd Container Line (GMBH); 2) Hanjin Shipping Co., Ltd.; 3) Kawasaki Kisen Kaisha, Ltd.; 4) APL Co. Pte. Ltd.; 5) United Arab Shipping Co. (SAG); 6) Cheng Lie Navigation Co. Ltd.; 7) Wan Hai Lines, Ltd.; 8) China Navigation Co., Ltd.; 9) Sinokor Lines; 10) Korea Marine Transport Co. Ltd.; 11) Zin Lines; 12) AP Moller-Maersk A/S; 13) Hamburg Snd; 14) SITC; 15) Hyundai Marchant Marine; and 16) Shandong Yantai, among others; that it is your opinion that the services rendered by your client to its customers are VAT zero-rated sale of services; that you filed your application for zero-rating at the Audit Information, Tax Exemption and Incentives Division (AITED), this Bureau, in compliance with Sec. 12 of RR No. 4-2007; and that however, it remained unacted by the said Office. cCEAHT In reply, please be informed that Section 108 (B) (4) of the Tax Code provides that: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate. xxx xxx xxx (4) Services rendered to vessels engaged in international shipping or international air transport operations, including leases of property for use thereof;" The above provision must be read in connection with Section 4.108 (b) (4) of Revenue Regulations No. 16-2005, as amended by RR No. 4-2007, to wit: "Sec. 4. 108-5. Zero-Rated Sale of Services. xxx xxx xxx (b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: IcHTED xxx xxx xxx (4) Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting February 1, 2006; " It is clear from the foregoing that the services rendered by VAT-registered entities to persons engaged in international shipping are entitled to VAT zero-rating. Thus, your client's services in the cleaning, washing, storing, repair and other special services on its customers' empty international containers are VAT zero-rated sale of services. 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.) JAMES H. ROLDAN Asst. Commissioner Legal Service