BIR Ruling [DA-603-06]

October 10, 2006 BIR RULING [DA-603-06] VAT Ruling No. 109-92 Ibiden Philippines, Inc . First Philippine Industrial Park Barangay Sta. Anastacia Sto. Tomas, Batangas Attention: Ms. Corazon De Castro Gentlemen : This refers to your letter dated December 7, 2005, which was referred to this Office by Revenue Region No. 9, San Pablo City by way of 2nd Endorsement dated July 4, 2006, requesting for a ruling as to whether or not the sale of scrap is subject to the 12% value-added tax (VAT). It appears that Ibiden Philippines, Inc., is a Philippine Economic Zone Authority (PEZA) registered 100% export enterprise; that it is a VAT taxpayer and is currently enjoying a 6-year Income Tax Holiday (ITH); that in the course of its business, it sells scrap items to local buyers in which you include the VAT as a separate item in your invoice; and the however, the scrap buyers are complaining that the Bureau of Customs office is likewise collecting the VAT from them before allowing the exit of the scrap items from the First Philippine Industrial Park (FPIP) Zone. In reply thereto, please be informed that Section 4.105-1 of Revenue Regulations No. 16-2005, implementing Republic Act (R.A.) No. 9337, provides that: "Sec. 4.105-1. Persons Liable . Any person who, in the course of his trade or business, sells, barters, exchanges or leases goods or properties, or renders services, and any person who imports goods, shall be liable to VAT imposed in Section 106 to 108 of the Tax Code. "However, in the case of importation of taxable goods, the importer, whether an individual or corporation and whether or not made in the course of his trade or business, shall be liable to VAT imposed in Section 107 of the Tax Code." In BIR VAT Ruling No. 109-92 dated October 2, 1992 , this Office ruled that sale of scraps is subject to value-added tax because these are sales "in the course of trade or business. . . ." ACETSa Considering that Ibiden Philippines, Inc. is a PEZA-registered enterprise and is under the ITH regime, and is engaged in the sale of scrap items to local buyers, which is in the course of trade or business as contemplated in Section 4.105-1 of Revenue Regulations No. 16-2005, the sale thereof is not considered an export sale, and consequently, the sale of scraps to its buyers is subject to the 12% VAT. 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