BIR Ruling [DA-524-98]

November 25, 1998 BIR RULING [DA-524-98] Camp John Hay Development Corporation Camp John Hay Baguio City Attention: Mr . Frederico S . Alquiros Chief Operating Officer Gentlemen : This refers to your letter dated November 18, 1998 requesting for the issuance of a VAT-exemption certificate for your purchase of two (2) units Mazda passenger cars, 1998 Model 323 from Amianan Motors, Inc., with main office address at the National Highway, Sevilla, San Fernando, La Union. cdt It is represented that as a corporation which has registered pursuant to Republic Act No. 7227, Proclamation No. 420 and other legal issuances relative to the creation of the John Hay Special Economic Zone, CJH Development Corporation enjoys the incentives as operator/developer of the Zone, hence, exempt from the imposition of value added tax on its purchase of motor vehicles from dealers operating within the customs territory. This, as claimed, is consistent with Section 10, Chapter 4 of the Implementing Rules and Regulation of the John Hay Special Economic Zone which provides, " purchases of raw materials, capital goods, equipment and services by JHSEZ enterprises from the customs territory shall be effectively zero-rated for VAT purposes However . . . shall apply with the Regulatory Operations Monitoring Division, BIR, National Office . . .". In reply thereto, please be informed that Section 106(A)(2)(c) of the Tax Code of 1997 provides that sales of goods and services to persons or entities whose exemption under special laws (e.g. R.A. No. 7227 and R.A. No. 7916) or international agreements to which the Philippines is a signatory effectively subjects such sales to zero-rate. Such being the case, the sale of two (2) units of Mazda passenger cars, 1998 Model 323 by Amianan Motors Inc. to your company shall be effectively zero-rated if Amianan Motors Inc. shall apply for effective zero-rating. In that case, Amianan Motors Inc. shall not impute or shift any VAT as part of the cost to be paid by CJH Development Corporation pursuant to Revenue Regulations No. 7-95, as amended. Without an approved application for zero-rating, however, the transactions otherwise entitled to zero-rating shall be considered exempt. In view thereof, we are granting your request for VAT-exemption for your purchase of two (2) sets of Mazda passenger cars, 1998 Model 323 from Amianan Motors Inc., with office address at the National Highway, Sevilla, San Fernando, La Union. Finally, your company is not liable to the corresponding ad valorem taxes for the purchase of such motor vehicles since it is the manufacturer or assembler who shall pay the said ad valorem taxes. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group