Dagupeña Long Island Agro Development Corporation

September 26, 2007 BIR RULING [DA-513-07] DA 267-06 Dagupea Long Island Agro Development Corporation No. 13 Mckinley Street, Poblacion Binmaley, Pangasinan Attention: Ms. Anne Marie B. Castro VP-Operations Gentlemen : This refers to your undated letter stating that your business is a non-VAT domestic corporation with TIN No. 005-575-954-000NV; that it is the producer of marinated, frozen, vacuum-packed boneless milkfish (bangus) marketed under the brand name Dagupea and uses only simple ingredient to maintain the natural state of the fish; that as of now, it is marketing the following milkfish products, to wit: EHTADa 1. Dagupea Bangus Steak deboned whole milkfish marinated in spices 2. Dagupea Daing na Bangus deboned whole milkfish marinated in vinegar, salt and a hint of garlic 3. Dagupea Pesto Bangus Belly boneless milkfish belly marinated in a mixture of oil and organic basil leaves ECSHID 4. Dagupea Teriyaki Bangus Belly boneless milkfish belly marinated in soy sauce and sugar (homemade) 5. Dagupea Honey Mustard Bangus Belly boneless milkfish belly marinated in a mixture of ground mustard, turmeric and naturally acquired honey from the mountain 6. Dagupea Thai Green Chili Belly boneless milkfish belly marinated in a paste made of mashed raw green chili and salt 7. Dagupea Bangus Tocino-Style boneless milkfish back fillet marinated in sugar and other natural spices, no artificial coloring or flavoring 8. Dagupea Bangus Chorizo-Style ground, raw boneless milkfish flesh mixed with milk solids and spices formed in food-grade collagen casing 9. Dagupea Prime Bangus Belly boneless milkfish belly, lightly salted ADCTac 10. Dagupea Daing ni Lola Bangus "Super Pinoy Series" available in 3-in-1 or 2-in-1 econopack; halved boneless milkfish marinated in vinegar, garlic and salt 11. Dagupea Spicy Daing na Bangus "Super Pinoy Series" available in 3-in-1 and 2-in-1 econopack; halved boneless milkfish marinated in cayenne (siling labuyo), vinegar, garlic and salt 12. Dagupea Inasal Daing na Bangus "Super Pinoy Series" available in 3-in-1 or 2-in-1 econopack; halved boneless milkfish marinated in lemongrass, achuete, vinegar and garlic. and that all of the above-mentioned products use any or a combination of the simple processes of marinating, freezing and vacuum-sealing for the preservation of the products, however, without the use or application of heat and/or other state-altering process. TaCDIc In connection therewith, you now request for a ruling that the sale of the above-mentioned products is exempt from the 12% value-added tax (VAT) pursuant to Section 4.109-1 (B) (1) (a) of Revenue Regulations No. 16-2005, implementing Republic Act (RA) No. 9337, which provides that "(a) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. xxx xxx xxx Marine food products shall include fish and crustaceans, such as, but not limited to, eels, trout, lobster, shrimps, prawns, oysters, mussels and clams. Meat, fruit, fish, vegetables and other agricultural and marine food products classified under this paragraph shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar packaging methods. ESCDHA xxx xxx xxx" Section 109 (c) of the Tax Code of 1997, as amended, defines the phrase "simple process of preparation or preservation for the market" by way of enumerating certain chemical or natural processes determined to be simple and usually being done to preserve the food product. What would be outside of the scope of the term "simple process" is the kind of physical or chemical process which would alter the exterior texture or form or inner substance of a product in such a manner as to prepare it for special use to which it could not have been put in its original form or condition. Accordingly, this Office holds that the sale of the above-mentioned products falls within the purview of the definition of a food product in its original state and consequently is exempt from VAT pursuant to Section 4.109-1 (B) (1) (a) of Revenue Regulations No. 16-2005, implementing Republic Act (RA) No. 9337. 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. HEcSDa Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service