BIR Ruling [DA-464-04]

August 30, 2004 BIR RULING [DA-464-04] E.O. 293 BIR Ruling No. 030-2003 National Food Authority Cagayan Provincial Office Nursery Site, Tuguegarao City, Cagayan Attention: Mr. Henry H. Tristeza Provincial Manager Gentlemen : This refers to your letter dated June 23, 2004 which was forwarded to this Office by the Chief, Legal Division, Revenue Region No. 3 requesting for an authority for the release of your refined sugar without the payment of advance VAT. It is represented that your sugar stocks are presently undergoing refinery at the Cagayan Robina Sugar Milling Company located at Sto. Domingo, Piat, Cagayan; that the sugar stocks amount to 16,197.5 kg. refined sugar with reference Quedan Receipt No. 3-000042; that these sugar stocks will be sold directly to consumers through the NFA; that attached herewith is a Debit Memo from the Philippine National Bank representing 3% business tax and 2% expanded withholding tax; and that you invoke Section 2 of Executive Order No. 293 stating that you are exempt from the payment of advance VAT. In reply, please be informed that sugar traders are required to pay Advance VAT before the withdrawal from the premises of the miller of the refined sugar owned by the trader. This is in accordance with Sections 4 and 5 of Revenue Regulations No. 7-89, as amended by Revenue Regulations No. 29-2002 which reads: "SEC. 4. Prohibition of withdrawal . The proprietor or operator of a sugar mill/refinery shall not allow any withdrawal of refined sugar from its premises without the advance payment of the VAT made by the owners/sellers and submission of proof thereof described in Section 5 of these Regulations, unless the said owner or seller presents proof to the sugar mill/refinery that it is exempt from VAT , as in the case of agricultural cooperatives which are exempt from the VAT on their sale of agricultural products pursuant to Republic Act No. 6938 (Cooperative Code of the Philippines) and Section 109 (r) of the Code, as implemented by Revenue Regulations No. 20-2001." Section 2 of Executive Order No. 293 dated March 1, 2004 provides: "Sec. 2. Funding . For this purpose, the NFA is hereby authorized to make available and use its corporate funds, manpower, other facilities and credit lines, as well as unremitted income accruing to the Agricultural Competitiveness Enhancement Fund (ACEF) as derived from the incentives of the Minimum Access Volume Importation of Sugar. The NFA is likewise exempted from the payment of advance Value Added Tax (VAT) when it refines its procured sugar." Accordingly, this Office confirms your opinion that, the National Food Authority is exempt from the payment of advance value added tax relative to the refinery of its sugar stocks pursuant to Section 2 of E.O. No. 293. However, since the refined sugar is not anymore considered in its original state as provided for in Section 109 (c) of the Tax Code of 1997, it is still subject to value added tax. What is being exempted is the manner of advance payment but not complete relief from the value added tax. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group