Imperial Scanship, Inc.

October 24, 2008 BIR RULING [DA-(VAT-020) 341-08] RR #16-2005; DA-376-2006 dtd. 6/15/06 Imperial Scanship, Inc. 18/F Ramon Magsaysay Center 1680 Roxas Blvd, Ermita Manila Attention: Ma. Luisa G. Fariolen Accountant Gentlemen : This refers to your letter dated August 13, 2008, requesting clarification on the tax consequence of Imperial Scanship, Inc. for being engaged in manning and crewing services to International Sea Carriers. Documents submitted disclosed that Imperial Scanship, Inc. is a domestic corporation engaged in the manning industry, deploying seamen to foreign ocean-going vessels; that it renders its manning services to Cargo-Link A/S (Drande, Denmark); CEC Shipmanagement A/S (Svendborg, Denmark; Ultraflex Agency S.A. (USA) Nordane Shipping A/S (Svendborg, Denmark); Get2Sea A/S (Fredericia, Denmark); H. Folmer & Co. (Copenhagen K, Denmark) and Janus Andersen & Co. APS (Norresundby, Denmark) among others; that as such it is paid for in dollars as certified by Metrobank UN Ave. CTR Branch (Manila). In reply, please be informed that Section 4.108-5 (b) (2) of Revenue Regulations (RR) No. 16-2005 states that: "(B) Transactions 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: HDATCc "(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;" In view of the foregoing, in order that the manning and crewing services of Imperial Scanship, Inc. be qualified for VAT zero-rating, they must meet two (2) requisites under RR 16-2005, namely: 1. The services must be rendered to persons engaged in business conducted outside the Philippines or to a non-resident foreign clients not engaged in business who are outside the Philippines when the services are performed; and 2. The fees must be paid to Imperial Scanship, Inc. are in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. Thus, the manning and crewing services that Imperial Scanship, Inc. renders to its clients may automatically qualify as VAT zero-rated transactions if said services are paid for in foreign currency and accounted for through our local banking system. Failing that the sale of said services will be regarded as subject to 12% VAT pursuant to Section 108 (A) of the Tax Code of 1997, as amended by R.A. 9337. In addition, to qualify Imperial Scanship Inc.'s sale of services to its foreign clients as VAT zero-rated sales, Imperial Scanship, Inc. must be a VAT-registered taxpayer in accordance with Section 4.108-5 (b) of RR 16-2005. 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. ASEIDH Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service