BIR Ruling [DA-662-04]

December 23, 2004 BIR RULING [DA-662-04] Department of Transportation and Communications Project Management Office for Ports 17th Floor, Columbia Tower Ortigas Ave., Mandaluyong City Attention: Celedonia B. Aclao OIC Project Director Gentlemen : This has reference to you letter dated March 10, 2004 endorsing to this Office the claim for reimbursement of China Harbour Engineering Company/Vicente T. Lao Construction Joint Venture (Company for brevity) in the amount of P69,906,790.11 representing alleged additional VAT related expenses in connection with the construction of General Santos Fishing Port. We regret to inform you that the claim of the Company is not within the jurisdiction of this Office to consider. It may be recalled that the additional expenses (for VAT) was brought about by the implementation of the amended VAT Law in 1996. Yet, the FIDIC rules which form part of the contract agreement provides that any such additional or reduction in project cost caused by the passage of law or regulation 28 days prior to the latest date for the submission of bids shall likewise cause the adjustment in the contract price. As such, this Office is of the considered opinion that it is the reduction of the contract price that gives the Company the right to reimbursement and not actually the implementation of the VAT Law which after all, the taxes due thereon should still be paid just the same. Hence, the claim of the Company should be addressed and processed by the implementing agency of the General Santos Fishing Port Project and the BIR interposes no objection to any payment that may be made by the DOTC-PMO Ports on this regard. Please consider the Bureau's stand on the matter. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group