BIR Ruling [DA-559-06]

September 19, 2006 BIR RULING [DA-559-06] 109 (d); VAT 060-02 Cochingyan & Peralta Law Offices Twelfth Floor, 139 Corporate Center 139 Valero Street, Salcedo Village Makati City Attention: Atty. Jose Cochingyan, III Gentlemen : This refers to your letter dated May 16, 2006 stating that your client, ALLTECH BIOTECHNOLOGY CORPORATION, is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that it is engaged in the importation of fish, poultry and livestock feed ingredients for sale in the country; that on April 25, 2005, a Certificate of Product Registration has been issued by the Bureau of Animal Industry (BAI) bearing BAI Registration No. VRI-94-262 with BAI License No. VDAPDI-0207; and that the said feed ingredients are as follows: 1. Acid Pack 4 Way; 2. Acid Pack 4 Way 2x; 3. Alizyme SSF; 4. Alizyme Vegpro; 5. Aqua-Mos; 6. Banox; 7. Bio-Mos Feed Supplement Powder; 8. Bioplex Broiler Formula; 9. Bioplex Cobalt; 10. Bioplex Copper; 11. Bioplex Creep Starter Formula; 12. Bioplex Grower Finisher Formula; 13. Bioplex Iron-Canada; 14. Bioplex Iron-USA; 15. Bioplex Layer Formula; 16. Bioplex Manganese; 17. Bioplex Poultry Breeder Formula; 18. Bioplex Sow Formula Feed Powder Premix; 19. Bioplex Zinc; 20. Cakeguard; 21. Eggshell 49A; 22. Eggshell 49 2x; 23. MTB-100 Powder Premix; 24. Nupro; 25. Selplex Premix Powder; 26. Allsweet; 27. De-Odorase; 28. Mold-Zap; 29. Pro-Sweet; and 30. Yea-sacc. In connection therewith, you now request for confirmation of your opinion that the importation and sale of the above-mentioned products which are used as ingredients in the manufacture of finished feeds primarily for consumption of livestock and poultry as well as fish and prawns are exempt from value-added tax (VAT) pursuant to Section 109(1)(B) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337, as implemented by Revenue Regulations No. 16-2005. In reply thereto, please be informed that Section 4.109-1(B)(1)(b) of Revenue Regulations No. 16-2005 provides that "(b) Sale or importation of fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium finish, zoo animals and other animals generally considered as pets), shall be exempt from VAT." In BIR VAT Ruling No. 060-02 dated September 16, 2002 , this Office ruled that ". . . . The foregoing provision refers to three transactions as being exempted from VAT, namely: 1. Sale or importation of fertilizers, seeds, seedlings and fingerlings; 2. Sale or importation of fish, prawn, livestock and poultry feeds; and 3. Sale or importation of feed ingredients used in the manufacture of fish, prawn, livestock and poultry feeds. Item 3, clearly refers to ingredients used in the manufacture of animal feeds. The word "ingredients" or "feed ingredients" are defined under R.A. No. 1556, as amended by Presidential Decree No. 7, and implemented by Administrative Order No. 35 dated September 23, 1975 as "any single article of feed or feeding stuff which enters into the composition of a ration, concentrate, or supplement." . . . ." HSacEI It is significant to note that since the manufacture, importation, sale or distribution of feeds or feeding stuff require a prior registration and permit from the Bureau of Animal Industry (BAI) under R.A. No. 1556, as amended by Presidential Decree No. 7, the certification on the nature and composition of the commodities/items as stated in the registration and import permit issued by BAI will govern the classification of the said items for purposes of VAT under Section 109(d) of the Tax Code of 1997. Since the BAI has classified Kem Curb Dry as ingredients in the manufacture of feeds, your importation of the said articles is exempt from the payment of VAT. Accordingly, this ruling shall serve as authority of the Bureau of Customs to release the above importation, which shall be in lieu of the issuance of the Application to Release Imported Goods (ATRIG)." Inasmuch as the above-mentioned products have been certified by the BAI as ingredients in the manufacture of finished feeds primarily for consumption of livestock, poultry, fish and prawns, the importation thereof shall be exempt from VAT pursuant to Section 109(d) of the Tax Code of 1997, as amended by R.A. 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service