BIR Ruling [DA-561-04]

November 9, 2004 BIR RULING [DA-561-04] 106 (A) (2); 108; RR 7-95; RMC 74-99 VAT 028-01; DA 142-04 Frescano Food International Incorporated Warehouse No. 2, Lot 3-A, Block 3 Calamba Premiere International Park Barangay Batino, Calamba City Attention: Mr. Celestino M. Palma III President & CEO Gentlemen : This has reference to your letter dated February 16, 2004 requesting confirmation of your opinion that Frescano Food International Incorporated (Frescano) is entitled to zero rating being a PEZA registered company. It is represented that Frescano is a domestic corporation located within the Calamba Premiere International Park Special Economic zone; that it was granted Certificate of Registration No. 03-062 dated August 20, 2003; and that it is engaged in the processing of milkfish products. In reply, please be informed that pursuant to Section 4.100-2(c) in relation to Section 4.100-3 of Revenue Regulations No. 7-95, sales by VAT-registered suppliers to the duly registered and accredited enterprises are qualified for the effective zero percent (0%) VAT. (BIR Ruling No. 028-01 dated May 22, 2001; DA 142-02 dated March 29, 2004) In addition thereto, Section 3(3) of Revenue Memorandum Circular provides, viz : "Section 3. Tax Treatment of Sales Made by A VAT Registered Supplier From Customs Territory, To A PEZA Registered Enterprise. xxx xxx xxx 3. In the final analysis, any sale of goods, property or services made by a VAT registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the class or type of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent (0%) VAT. Accordingly, all sales of goods or property to such enterprise made by a VAT registered supplier from the Customs Territory shall be treated subject to 0% VAT, pursuant to Section 106(A)(2)(a)(5), NIRC, in relation to Art. 77(2) of the Omnibus Investment Code, while all sales of services to the said enterprises, made by VAT registered suppliers from the Customs Territory, shall be treated effectively subject to the 0% VAT, pursuant to Section 108(B)(3), NIRC, in relation to the provisions of R.A. 7916 and the "Cross Border Doctrine" of the VAT system. This Circular shall serve as a sufficient basis to entitle such supplier of goods, property or services to the benefit of the zero percent (0%) VAT for sales made to the aforementioned ECOZONE enterprises and shall serve as sufficient compliance to the requirement for prior approval of zero rating imposed by Revenue Regulations No. 7-95 effective as of the date of the issuance of this Circular." On the basis of the foregoing, the sales of Frescano Food International Incorporated suppliers qualifies for VAT 0% rating as a sale to PEZA registered enterprises no longer need prior approval for VAT 0% rating. 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group