BIR Ruling [DA-614-99]

November 3, 1999 BIR RULING [DA-614-99] R.E. Cabote & Associates 3rd Floor Vernida IV Building Alfaro St., Salcedo Village 1227 City of Makati Attention: Atty . Regulus E . Cabote and Atty . Emelyn W . Corpus-Martinez Gentlemen : This refers to your letter dated September 20, 1999 stating that your client, Philippine Phosphate Fertilizer Corporation (Philphos), a VAT-registered entity with VAT Registration No. 500-000-488-010V, operates a wharf, for its exclusive use, which it leases from the National Development Corporation; that vessels owned by a foreign shipping lines dock in this wharf when unloading imported materials to be used in the manufacture of Philphos products or when loading Philphos' products for export; that incident to the docking of said foreign vessels, Phisphos renders certain port services like the assistance, line handling and fresh water supply, among others; that prior to docking, the local agents of these foreign vessels deposit certain sums with Philphos to guarantee payment of the port services to be rendered by the latter; that after the services are done, Philphos sets-off its charges for port services against these deposits and sends the corresponding billing statements to the local agents; and that the local agents, in turn, seeks reimbursement of said charges from their foreign principals who make payment by way of inward remittances in foreign currency to the account of their respective local agents. Based on the foregoing, you now request for a ruling that the services of Philphos renders to these foreign shipping vessels are subject to zero percent (0%) value added tax. In reply, please be informed that Section 108 (B) (2) and (4) of the Tax Code of 1997 provides, viz : "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties . xxx xxx xxx "(B) Transaction Subject to Zero Percent (0%) Rate . The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: "(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines . . . "(2) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); xxx xxx xxx "(4) Services rendered to vessels engaged exclusively in international shipping; and xxx xxx xxx Pursuant to the aforecited provision, services rendered by Philphos which is VAT registered entity, like tug assistance, line handling and fresh water supply, among others, to vessels owned by foreign shipping lines and/or paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP are subject to the value-added tax of zero percent (0%). 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group