Midora Industrial Co., Ltd. RHQ-Manila

November 17, 2008 BIR RULING [ DA - (VAT-035) 430-0 8] DA 364-04 Midora Industrial Co., Ltd. RHQ-Manila 4th Floor, PDCP Bank Centre, Cor. Rufino & Leviste Streets Salcedo Village, Makati City Attention: Jae Kyong Lee General Manager Gentlemen : This refers to your letter dated October 13, 2008 stating that your company, Midora Industrial Co., Ltd., is a multinational company organized and existing under the laws of Republic of Korea; that it is authorized to establish and operate a Regional Headquarters in the Philippines under Securities and Exchange Commission (SEC) Registration and License No. A200019437 dated December 28, 2000; and that it is planning to purchase a motor vehicle for its official use in the Philippines. Based on the foregoing representations, you now request for an opinion as to whether or not the sale of motor vehicle to Regional Headquarters is exempt or subject to value-added tax (VAT) at zero percent rate (0%). In reply thereto, please be informed that Section 109 (p) of the Tax Code of 1997, as amended by Republic Act (RA) No. 9337, provides that services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines shall be exempt from value-added tax. aDSAEI In relation therewith, Section 14 of R.A. No. 8756 provides that regional or area headquarters shall be exempted from the value-added tax. The sale or lease of goods and property and the rendition of services to regional or area headquarters shall be subject to zero percent (0%) VAT rate as provided for in the National Internal Revenue Code, as amended. Corollarily, Article 65 of Executive Order No. 226 provides that the regional or area headquarters of multinational companies shall be exempt from all kinds of local licenses, fees, dues, imposts or any other local taxes or burdens. Thus, in BIR Ruling No. 047-01 dated September 28, 2001, this Office ruled that ". . . . the activities of the proposed RHQ to be established by CAL shall be exempt from VAT pursuant to Section 109(p) of the Tax Code of 1997. On the other hand, sale or lease of goods and property and the rendition of services to the RHQ shall be subject to zero percent (0%) pursuant to Section 14 of R.A. No. 8756." SUCH BEING THE CASE, this Office holds that the sale of motor vehicle to your company as a regional headquarter shall be subject to VAT at zero percent (0%). aCIHAD This ruling shall be 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