BIR Ruling [DA-592-04]

November 23, 2004 BIR RULING [DA-592-04] 106 (A) (2) (a) (5); 108 (B) (3) RR 7-95; RMC 74-99 VAT Ruling 047-01 Max's Ermita Inc. Penthouse, Max's Building Roxas Boulevard, Baclaran Paraaque City Attention: Armando F. Orcena Chief Accountant Gentlemen : This refers to your letter dated August 14, 2004 requesting for a ruling whether the sale of food and supply of catering services to PEZA-registered enterprises is subject to zero percent (0%) VAT. It is represented that MAX'S (ERMITA), INC. (Max's for brevity), is the owner and operator of Max's Dasmarias Restaurant located along Aguinaldo Highway Dasmarias, Cavite. Max's Dasmarias is often requested to supply food and catering services to PEZA-registered enterprises within the ECOZONE. In reply thereto, please be informed that Revenue Memorandum Circular No. 74-99 provides that . . . any sale of goods or services made by a VAT-registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent (0%) VAT. Accordingly, all sale 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 a 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 the date of issuance of this Circular." It is clear from the foregoing that any sale of goods or services made by Max's to PEZA-registered enterprise within the ECOZONE is subject to zero percent (0%) VAT. Furthermore, Max's is not required to secure any prior permit from the Bureau of Internal Revenue in order to be entitled to the benefit of the zero percent VAT in respect of its sales of goods or services to PEZA-registered enterprise. ( VAT Ruling No. 047-2001 dated July 16, 2001 ) It is understood, however, that Max's should use and issue only a duly registered VAT invoice on which the word "zero-rated" is imprinted thereon to cover the aforesaid zero-rated sales, pursuant to the provisions of Sec. 4.108-1 of Revenue Regulations No. 7-95, otherwise known as the Consolidated Value-Added Tax Regulations. DAEICc 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group