BIR Ruling [DA-539-06]

September 7, 2006 BIR RULING [DA-539-06] R.A. No. 9337; VAT Ruling No. 075-99 Sycip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty. F.K. De Los Santos Tax Division Gentlemen : This refers to your letter dated February 28, 2006 requesting for confirmation that East Asia Fish Company, Inc. (EAFCI) can register its export sales as zero-rated and at the same time have its local sales remain as exempt from VAT as provided under Section 109(1)(0) of the 1997 Tax Code, as amended by Section 7 of Republic Act No. 9337. It is represented that EAFCI is a domestic corporation engaged in the export and sale of fresh fish and other marine food products; that its operation consists of purchasing of fresh fish (i.e., tuna and other marine food products) and packaging the same into vacuum packs for immediate export abroad; that the resulting export products are vacuum packed frozen fish choice cuts; that from the said production process, certain parts of the fresh fish which are not exportable and fresh fish products which do not pass the export quality standard are sold by EAFCI to the local market; that in order to claim the input VAT component on the purchase of goods and services directly attributable and or allocable to its export production and thus, reduce the cost of its export products making them more competitive in the export market, EAFCI seeks to register its export sale of vacuum packed frozen fish choice cuts under the optional VAT registration and thus, be subject to VAT at zero (0%) rate; and that on the other hand, EAFCI will opt as a Non-VAT taxpayer for its local sale of fresh fish scraps and non-exportable fresh fish packs and thus, its local sale of fresh fish scraps and non-exportable fresh fish packs shall remain VAT-exempt. In reply, please be informed that Section 236 (H) of the Tax Code, as amended by Republic Act (RA) No. 9337, provides for the optional registration of exempt persons, as follows: "(H) Optional Registration of Exempt Person . Any person who is not required to register for value-added tax under Subsection (G) hereof may elect to register for value-added tax by registering with the Revenue District Office that has jurisdiction over the head office of that person, and paying the annual registration fee in Subsection (B) hereof." Such being the case, this Office hereby confirms your opinion that EAFCI may register as VAT taxpayer subject to VAT at zero (0%) rate with respect to its export sales and claim its corresponding input taxes for refund or credit in accordance with Section 112 of the same Code on purchases of goods and services directly attributable to its zero-rated transactions and, at the same time, remain exempt from VAT on its local sales under Section 109 (1) (O) of the Code. However, input taxes attributable to its local sales can not be claimed as input tax credits as provided under Section 110 of the Tax Code nor can these be claimed for refund or tax credits under Section 112 as these shall remain as part of the cost of purchases and deductible as an expense for income tax purposes. (VAT Ruling No. 075-99, dated August 6, 1999) This ruling is issued on the basis of the facts represented. If upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service