Primefresh Harvest, Inc.

November 17, 2008 BIR RULING [DA-(VAT-034) 428-08] DA 513-07 Primefresh Harvest, Inc. 3rd Floor, Igloo Supply Chain Building Manggahan Light Industrial Park Amang Rodriguez Avenue Pasig City Attention: Ms. Melissa R. Caylao Designated Representative Gentlemen : This refers to your letter dated July 11, 2008, which was referred to this Office by the Department of Finance by way of its 1st Indorsement dated September 16, 2008, requesting for exemption from the payment of value-added tax on its importation of fresh mushroom and smoked salmon under Section 109 (c) of the Tax Code of 1997, as amended by Republic Act (RA) No. 9337, as implemented by Revenue Regulations No. 16-2005, as amended. It is represented that Primefresh Harvest, Inc. is a corporation organized and existing under the laws of the Philippines and duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200809562 dated June 20, 2008; that it is organized primarily to engage in the manufacture, production, processing, packing, preserving, distribution and marketing at wholesale, import and export of any and all goods, commodities, wares and merchandise of every nature and description, including but not limited to, all kinds of food and food-related products, to the extent permitted by law; and that it is a wholesaler of imported agricultural and other food products. In reply thereto, please be informed that Section 4.109-1 (B) (1) (a) of Revenue Regulations No. 16-2005, as amended, provides that "(a) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore, shall be exempt from VAT. DIEcHa xxx xxx xxx Meat, fruit, fish, vegetables and other agricultural and marine food products classified under this paragraph shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar packaging methods. xxx xxx xxx" In stressing the rationale of the above-mentioned provisions, this Office elucidated the matter in BIR Ruling No. DA 242-07 dated April 17, 2007, as follows: It must be understood that to be exempt from VAT, the subject agricultural and marine products must be in its original state as defined above. Moreover, this part of the law is limited in application it refers only to such products which are intended as food for human consumption (cited in VAT Ruling No. 077-99 dated August 6, 1999). Hence, the exemption is not given to a specific taxpayer but to the nature of the transaction involved. Accordingly, and provided that the subject agricultural and marine products ( i.e. , meats, fish and chickens) are in their original state and are food for human consumption, only the sale of the above products as qualified are considered VAT exempt. Corollarily, in BIR Ruling No. DA 513-07 dated September 26, 2007, this Office ruled by way of defining the phrase "simple process of preparation or preservation for the market" by way of enumerating certain chemical or natural processes determined to be simple and usually being done to preserve the food product. What would be outside of the scope of the term "simple process" is the kind of physical or chemical process which would alter the exterior texture or form or inner substance of a product in such a manner as to prepare it for special use to which it could not have been put in its original form or condition. SUCH BEING THE CASE, this Office holds that the fresh mushroom and smoked salmon fall within the purview of the definition of food product in its original state and consequently their importation is exempt from VAT pursuant to Section 4.109-1 (B) (1) (a) of Revenue Regulations No. 16-2005, as amended. DISaEA 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service