BIR Ruling [DA-544-04]

November 3, 2004 BIR RULING [DA-544-04] Section 108 (b) DA-008-96; 062-90; VAT Ruling No. 11-98 Vantage Resources Corporation Unit 509 Cityland 10 Tower II, 6817 H.V. dela Costa cor. Valero Sts., Salcedo Village, Makati City Attention: Mr. Ernesto G. Rosales General Manager Gentlemen : This refers to your letter dated July 26, 2004, requesting for reconsideration of a ruling issued by this Office on your request for exemption from VAT. It is represented that this Office issued BIR Ruling No. DA-367-2004 dated June 30, 2004 denying your request for exemption from VAT dated August 26, 2003; that you opine that the issue of the request was not addressed as the ruling issued never mentioned that you were indeed denied exemption; that the issued ruling was able to post a remedy which you can avail for your prior transactions with 3M Philippines; that you reiterate that you should be exempted from the VAT on the ground that the customs bonded manufacturing warehouse is removed from the jurisdiction of the Philippine Customs Territory, and therefore your importations were never introduced into Philippine commerce; and that you want to be clarified as to whether you could be exempt from the VAT pursuant to VAT Ruling No. 085-90 dated April 5, 1990. In reply, please be informed that the sale of goods by a VAT-registered entity is subject to the 10% value-added tax. Since VANTAGE and 3M Phils. are both VAT registered, their sale of goods are subject to 10% VAT unless the transaction is exempt from VAT under Section 109 or the transaction is subject to the zero-percent (0%) rate pursuant to Section 106(A)(2)(a). Thus, the sale of imported goods by 3M Phils. to VANTAGE, which were shipped from abroad and delivered directly to VANTAGE's rented space at AAI ICBW No. 180, and by which it issue an invoice inclusive of VAT, is in order. We noted VANTAGE's representation that the goods sold to it by 3M Phils. are being shipped from abroad and delivered directly to VANTAGE rented space at AAI Logistics Inc. ICBW No. 180. AAI Logistics Inc. is a Bureau of Customs controlled Industry-Specific Bonded Warehouse that leases only to tenants/companies exclusively selling to customers located at PEZA ECOZONE and Industrial Parks. In this connection, this Office has consistently ruled that the Customs Bonded Manufacturing Warehouse is removed from the jurisdiction of the Philippine Customs Territory, 1 hence, payments of internal revenue taxes shall be made upon withdrawal or removal from customs custody. 2 Such being the case, this Office hereby opines that, ICBW is considered removed from Philippine customs territory. Therefore, shipment/delivery of imported goods thereto is not subject to the 10% VAT. In the instant case, the importation of products and/or supplies that are merely consigned and stored in an ICBW is not subject to 10% VAT, since by the very nature of consignment, these articles are not intended to enter Customs Territory . TEcCHD Accordingly, since the goods were never introduced to Philippine Customs Territory, the sale of goods by 3M Phils. to VANTAGE is exempt from VAT. This ruling supplements BIR Ruling No. DA-367-2004 dated June 30, 2004 in respect to matters of taxation of VANTAGE. This ruling is being issued on the basis of the facts as represented. However, if upon investigation, it will be disclosed that the facts are different, and/or any of the requirements imposed in this letter is not complied with, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group Footnotes 1. VAT Ruling No. 011-98 dated March 4, 1998. 2. Hamlin vs. Collector of Internal Revenue , 106 Phil. 723 as cited in VAT Ruling 085-90 dated April 5, 1990.