ANT Industrial Works, Inc.

August 20, 2008 BIR RULING [DA-(IL-015) 154-08] 108; RR 16-2005; VAT-10-2004 ANT Industrial Works, Inc. Lot 2, Blk. 21, Carmelita Street Stateland Hills Subd., Gen. Trias Cavite Attention: Ms. Ma. Elma I. Ame Tax Agent Gentlemen : This refers to your letter dated June 11, 2008 requesting for confirmation of your opinion that ANT Industrial Works, Inc. (ANT) is subject to zero percent (0%) Value-Added Tax inasmuch as (a) the services it renders are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; and (b) its projected business transactions are with entities enjoying exemptions and privileges under the PEZA law. It is represented that ANT, with office address at Lot 2, Block 21, Carmelita St., Stateland Hills Subdivision, General Trias, Cavite, is a corporation organized and existing under and by virtue of the laws of the Republic of the Philippines and registered with the Securities and Exchange Commission under SEC Registration No. ASO94-002087; that it is likewise registered with the Bureau of Internal Revenue District Office No. 054-Trece Martirez City as a Value-Added Taxpayer as evidenced by BIR Certificate of Registration OCN 1RC0000282961 dated January 01, 1997; that ANT is an entity primarily engaged in the fabrication, installation and maintenance of heating, ventilation and airconditioning facilities, automation and other works related thereto; that under a Contract dated April 28, 2008, M W Zander (Taiwan) Pte., Ltd. (Zander), a foreign corporation with business address at No. 16 International Business Park, #02-00, Singapore, as contractor and ANT as subcontractor, undertook to manufacture, install and deliver the following: M1 Recirculation Air System USD 188,228.65 M2 MAU System USD 139,615.35 which shall form part of the Texas Instruments Clark Project with Project No. C-630061; that under the aforementioned Contract, ANT shall provide all the equipment necessary to carry out and bring to completion the works and shall maintain the same in good working condition; that as specifically stipulated, the total contract price is USD 327,844.00; and that furthermore, ANT has expressed interest to engage in business with entities registered with the Philippine Economic Zone Authority. cSATEH In reply, please be informed that Sec. 4.108-5 (b) (1) (2) and (3) of Revenue Regulations No. 16-2005 provides viz. : "SEC. 4.108-5. Zero-Rated Sales of Services . . . . xxx xxx xxx (b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines, which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; (2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; xxx xxx xxx Inasmuch as ANT undertook to manufacture, install and deliver M1 Recirculation Air System and M2 MAU System and export the same to M W Zander (Taiwan) Pte., Ltd. (Zander), a foreign corporation with business address at No. 16 International Business Park, #02-00, Singapore, the same shall be subject to VAT at the rate of zero percent (0%), it being considered a zero-rated transaction provided it complies with the other requirements such as: (a) paid for in acceptable foreign currency or its equivalent in goods and services and (b) accounted for in accordance with the rules and regulations of the BSP. Consequently, the passed on VAT (input tax) to ANT by local suppliers of said M1 Recirculation Air System and M2 MAU System to be exported may be available as tax credit or refund upon the filing of the necessary application to this Bureau. (VAT Ruling No. 10-2004 dated April 16, 2004) Anent your second question, the projected business transactions are based on hypothetical situation, hence included in the list of No-Ruling Areas pursuant to Section 2 (t) of Revenue Bulletin No. 1-2003, which provides viz. : "Sec. 2. List of No-Ruling Areas . The following shall hereby be construed and identified as "No-Ruling Areas." xxx xxx xxx (t) Request for ruling on issue/s or transaction based on hypothetical situation." Hence, this Office declines to make a ruling thereon. This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed or discovered that the facts are different, then this ruling shall be without force and effect insofar as the parties herein are concerned. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service