BIR Ruling [DA-513-04]

September 30, 2004 BIR RULING [DA-513-04] Consunji Bonifacio Rye Dela Rosa Sison & Navarro 2nd Floor, Dacon Building 2281 Pasong Tamo Extension Makati City Attention: Atty. Roberto J. Consunji and Atty. Carlia Valencia-Rye Gentlemen : This refers to your letter dated August 31, 2004 requesting for an opinion as to whether or not the importation of vessel, M/V Japanese Dream (subsequently renamed "M/V Philippine Dream") with a gross tonnage of 9,318 tons is exempt from value-added tax. It is represented that your client, Philippine Dream Company, Inc. (PDCI), has imported one (1) unit twin screw steel hull motor passenger vessel M/V Japanese Dream (subsequently renamed M/V Philippine Dream: with a gross tonnage of 9,318 tons; that on June 1, 1995, the aforesaid vessel arrived at the Port of Cebu, Cebu City; that the Import Entry & Internal Revenue Declaration for the vessel provides: Taxable Value Php 400,675,000.00 (US $15,500,000.00) Customs Duty Php 12,020,250.00 Php12,020,250.00 Brokerage Fee Php 5,000.00 Documentary Stamp Php 250.00 Others/IPF Php 250.00 Total Landed Cost Php 412,700,750.00 Total Value Added Php 41,270,075.00 Others Php 500.00 Total Liquidation Php 53,290,825.00 that pursuant to an Indorsement from the Department of Finance (DOF) dated November 24, 1994, the Bureau of Customs released the vessel to PDCI free from taxes and duties; and that inspite of the DOF 1st Indorsement which released the vessel free from taxes, value-added tax in the amount of P41,270,075.00 was imposed per Import Entry Declaration dated June 21, 1995. In reply thereto, please be informed that Section 4 of Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law which took effect on May 28, 1994 [now Section 109(g) of R.A. No. 8424], provides that "Section 103. Exempt transactions . The following shall be exempt from value-added tax: "(g) Importation of passenger and/or cargo vessels of more than five thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator hereof." Corollarily, in BIR Ruling No. 063-96 dated May 31, 1996 , this Office had already the occasion to rule on the matter when it said that ". . . per Certification dated May 28, 1996, issued by the Honorable Congressman Exequiel B. Javier, Chairman, Committee on Ways and Means, House of Representatives, the unit of measure used in Section 103(g) of the National Internal Revenue Code as amended by R.A. 7716 which provides for the exemption from value-added tax of the importation of passenger and/or cargo vessel of more than five thousand (5,000) tons whether coastwise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator thereof refers to the deadweight (DWT). ". . . based on the foregoing facts, and pursuant to Section 103(g) of the Tax Code, as amended by R.A. 7716, your opinion that your importation of the subject vessel is exempt from value-added tax is hereby confirmed." IN VIEW OF THE FOREGOING, this Office holds that the importation of M/V Japanese Dream (subsequently renamed M/V Philippine Dream) with a gross tonnage of 9,318 tons by PDCI is exempt from value-added tax under Section 103(g) of the Tax Code (now Section 109(g) of R.A. No. 8424). CDTSEI 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group