BIR Ruling [DA-568-04]

November 10, 2004 BIR RULING [DA-568-04] 109 (d); 113-88 Gross Ostrich Farm Import Export Co., Ltd. G.E. Antonino, Pob. Jaen Nueva Ecija Attention: Ms. Louiesinia G. Gross President Gentlemen : This refers to your letter dated September 6, 2004 requesting exemption from the payment of Value-Added Tax on your importation of the following premix materials to be used to manufacture feeds for ostrich breeding and commercial propagation, to wit: #1644C BM MVTM Breeder Ostrich Premix #1581C BM MVTM Starter Ostrich Premix #1605C BM MVTM Starter Ostrich Premix Vitamin ADE Pmx 1.5 .3-50 Vitamin E 20,000 U/# Documents, submitted to this Office disclosed that on March 10, 2003, the Bureau of Animal Industry (BAI) of the Department of Agriculture issued a certification that you are a bonafide livestock/poultry breeder eligible for tax exemption pursuant to Section 105, Paragraph "r" of the Tariff and Custom Code of the Philippines; that consequently on August 31, 2004, BAI Registration No. 2004-2218-BAI has been issued in your favor; that likewise, BAI issued certifications that the above importation are feed supplements intended for own consumption/trial purposes and are registered with the said Office for livestock, poultry and aquaculture feeds use only; that on September 27, 2004 BAI issued Certification that ostriches, are considered as poultry and are bred in the Philippines; and that RDA-RR #4 Ruling No. 120-03 has been issued exempting you from the payment of VAT. Based on the foregoing representations, you now request an opinion that income derived by MRI, in the form of service fees, for the sale of its services to the top ten thousand (10,000) corporations is subject to the 2% creditable withholding tax prescribed in Section 3 of Revenue Regulations No. 17-2003. In reply thereto, please be informed that Section 2.57.2 (M) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 17-2003 provides that "Sec. 2.57.2. Income payments subject to creditable withholding tax and rates prescribed thereon. Except as herein otherwise provided, there shall be withheld a creditable withholding tax at the rates specified for each class of payee from the following items of income payments to persons residing in the Philippines. xxx xxx xxx "(M) Income payments made by the top ten thousand (10,000) private corporations to their local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax. Income payments made by any of the top ten thousand (10,000) private corporations, as determined by the Commissioner, to their local/resident supplier of goods and local/resident supplier of services, including non-resident alien engaged in trade or business in the Philippines: Supplier of goods One percent (1%) Supplier of services Two percent (2%) xxx xxx xxx The term "local/resident supplier of goods" pertains to a supplier from whom any of the top ten thousand (10,000) private corporations, as determined by the Commissioner, regularly makes its purchases of goods. As a general rule, this term does not include a casual purchase of goods, that is, purchases made from non-regular suppliers and oftentimes involving single purchases. However, a single purchase which involves ten thousand pesos (P10,000.00) or more shall be subject to a withholding tax. The term "regular suppliers" refers to suppliers who are engaged in business or exercise of profession/calling with whom the taxpayer-buyer has transacted at least six (6) transactions, regardless of amount per transaction, either in the previous year or current year. The same rules TESICD In reply, please be informed that Section 109 (d) of the Tax Code of 1997 provides, viz.: "SEC. 109. Exempt Transactions. The following shall be exempt form the value-added tax: xxx xxx xxx (d) 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 fish, zoo animals and other animals generally considered as pets);" . . . Accordingly, since ostriches are classified as poultry and are bred in the Philippines, the above importation of livestock and poultry feeds are exempt from the payment of the Value-Added Tax. 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 and Inspection Group