BIR Ruling [DA-428-06]

July 14, 2006 BIR RULING [DA-428-06] 7227; 093-95 Inyoung-Philippines Inc. Portion of Blocks 11 and 15 Subic Bay Freeport Zone Olongapo City, Zambales Attention: Mr. Kiwon Yang General Manager Gentlemen : This refers to your letter dated May 22, 2006 which was forwarded to this Office by the Chief, Legal Division of Revenue Region No. 4, San Fernando, Pampanga, requesting for a certificate of exemption from value-added tax relative to the company's purchases of goods and services. It is represented that Inyoung-Philippines, Inc. (Inyoung for brevity) is registered and classified as a Subic Bay Freeport Enterprise pursuant to Republic Act (RA) No. 7227 otherwise known as the "Bases Conversion and Development Act of 1992". Inyoung is engaged in the business of manufacturing, fabrication, construction and trading of steel structures for the project of HHIC-Phil., Inc in Redondo Peninsula from Portion of Blocks 11 and 15, SRF Compound, Subic Bay Freeport Zone. In reply, please be informed that Section 4A(e) of Revenue Regulations No. 1-95, implementing the tax incentives provisions under paragraphs (b) and (c) of Section 12, R.A. 7227, provides as follows: "SEC. 4. EXEMPTIONS AND INCENTIVES. a. All SBMA registered enterprises doing business within the Secured Area in the Zone shall enjoy the following: xxx xxx xxx e. Purchases of raw materials, capital goods and equipment and services by the SBMA and SBF accredited enterprises in the Customs Territory shall be considered effectively zero-rated for VAT purposes. However, the VAT registered enterprises in the Customs Territory shall apply for effectively zero-rating of their sales of goods and services to SBMA and to SBF enterprises pursuant to Revenue Regulations No. 5-87, as amended." Accordingly, your purchases of products and services from your suppliers in the Customs Territory shall be considered effectively zero-rated for VAT purposes. Provided, however, that your suppliers, aside from being VAT-registered, shall apply for effective zero-rating on the sale of goods and services to Inyoung with the Audit Information, Tax Exemption and Incentives Division, BIR National Office, in accordance with RR No. 5-87, as amended by RR 7-95 and further amended by RR 16-2005. Without an approved application for effective zero-rating, the transaction otherwise entitled to zero-rating 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service