Four N Cold Reefer, Inc.

May 27, 2009 BIR RULING [DA-(VAT-044) 260-09] 16-2005, as amended; BIR Ruling No. DA-077-07 Four N Cold Reefer, Inc. Block 4 Lot 20 Valencia St., Camella Homes Barangay Village, San Antonio, Sucat Road Paraaque City Attention: Nestia Pauline A. Sevilla President Gentlemen : This refers to your letter dated May 13, 2009 requesting for a ruling whether or not reefer monitoring services rendered to companies engaged in international shipping are subject to value-added tax (VAT) at zero percent (0%) rate. SDATEc It appears that Four N Cold Reefer, Inc. is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200801563 dated February 12, 2008 with Taxpayer Identification Number (TIN) 006-964-869; and that the purposes for which the corporation are as follows: 1. To engage or enter into contracting, such as domestic freight forwarding services and reefer monitoring services for various individuals, companies or corporations; and 2. To engage in the marketing of the said domestic freight forwarding services and reefer monitoring services. In reply, please be informed that paragraph (b) (4) of Section 4.108-5 of Revenue Regulations No. 16-2005, as amended, provides: "(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: xxx xxx xxx (4) Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to 10% (now 12%) VAT under Sec. 108 of the Tax Code; In addition, Section 4.108-6 of the same Revenue Regulations provides: "SEC. 4.108-6. Effectively Zero-Rated Sale of Services . The term "effectively zero-rated sales of services" shall refer to the local sale of services by a VAT-registered person to a person or entity who was granted indirect tax exemption under special laws or international agreement. Under these Regulations, effectively zero-rated sale of services shall be limited to local sales to persons or entities that enjoy exemptions from indirect taxes under subparagraph (b) nos. (3), (4) and (5) of this Section. The concerned taxpayer must seek prior approval or prior confirmation from the appropriate offices of the BIR so that a transaction is qualified for effective zero-rating. Without an approved application for effective zero-rating, the transaction otherwise entitled to zero-rating shall be considered exempt. The foregoing rule notwithstanding, the Commissioner may prescribe such rules to effectively implement the processing of applications for effective zero-rating." ICDSca Accordingly, since Four N Cold Reefer, Inc. is engaged in the sale of reefer monitoring services to international shipping vessels, i.e. , monitoring of container cargoes while said vessels enter the Philippine ports, said services therefore are subject to VAT at zero percent rate in accordance with paragraph (b) (4) of Section 4.108-5 of Revenue Regulations No. 16-2005, as amended. 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service