Ticalaan Resources Corp.

July 28, 2008 BIR RULING [DA-(VAT-011) 080-08] RR No. 16-05; 4-2007; DA 367-07 Ticalaan Resources Corp. Unit 7B MAPFRE ASIAN Corporate Center Acacia Avenue, Madrigal Business Park, Ayala Alabang, Muntinlupa Attention: Christopher S. Pastrana EVP and General Manager Gentlemen : This refers to your letter dated July 18, 2008 requesting confirmation of your opinion that the sale of goods made by your company to a PEZA-registered enterprise is subject to value-added tax (VAT) at zero percent (0%) rate. It is represented that Ticalaan Resources Corp., (Ticalaan, for brevity) is a corporation duly organized and existing under and by virtue of Philippine laws with office address at Unit 7B-MAPFRE ASIAN Corporate Center, Acacia Avenue, Madrigal Business Park, Ayala Avenue, Ayala Alabang, Muntinlupa City. It is registered with the Bureau of Internal Revenue as a VAT taxpayer. It is further represented that Ticalaan supplies pyrites (a kind of metallic mineral) to Philippine Phosphate Fertilizer Corporation (Philphos, for brevity), a domestic corporation registered with the Philippine Economic Zone Authority as an Ecozone Export Enterprise per PEZA Certificate of Registration No. 06-36. In connection with the foregoing, you now request for a ruling that the sale of pyrites by Ticalaan to Philphos is subject to VAT at zero percent (0%) rate. In reply, please be informed that Section 106 (A) (2) (a) (5) of the National Internal Revenue Code of 1997, as amended by Republic Act 9337, provides: DIAcTE "SEC. 106. Value-added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. . . . (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) . . . (5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws;" The abovecited provision is implemented by Section 4.106-5. (a) (5) of Revenue Regulations (Rev. Regs.) 16-2005, as amended by Rev. Regs. 4-07, which states in part that: "SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. . . . The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. . . . (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. "Considered export sales under Executive Order No. 226" shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; . . . Provided, further, That pursuant to E.O. 226 and other special laws, even without actual exportation, the following shall be considered constructively exported: (1) . . .; (2) sales to export processing zones pursuant to Republic Act (R.A.) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones; (3) . . . (4) . . . (5) . . . " (emphasis ours) From the foregoing, it is clear that the sale of goods to PEZA-registered enterprises by VAT-registered suppliers in the Customs Territory, is treated in law as export sales, and thus entitled to the benefit of zero percent (0%) VAT. Accordingly, this Office confirms your opinion that the sale of pyrites by Ticalaan to Philphos is subject to VAT at zero percent (0%) rate. Further, the input tax on purchases of goods or services related to such zero-rated sale incurred by Ticalaan shall be available as tax credit or refund in accordance with the provisions of Rev. Regs. 4-2007. 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 as null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service