Hermogenes C. Caylan III

November 26, 2008 BIR RULING [DA-(VAT-047) 465-08] 109 (B); VAT Ruling 017-04 Hermogenes C. Caylan III Port Collector Laguna Customs Office Laguna Technopark Sta. Rosa City, Laguna Sir : This refers to your letter dated May 19, 2008 requesting on behalf of Universal Harvester, Inc. whether or not its local sale of HYDROCHLORIC ACID is subject to value-added tax (VAT). aTSEcA It appears that Universal Harvester, Inc. is a company located at Carmelray Industrial Park 2 Special Economic Zone under Philippine Economic Zone Authority; that it is importing Muriate of Potash , a kind of fertilizer certified by Fertilizer and Pesticide Authority as customs duty free and exempt from VAT as provided under Sec. 4.109-1 of Revenue Regulations No. 16-2005, as amended; and that said fertilizer is the main raw material used by Universal Harvester, Inc. in the production of another fertilizer namely Potassium Sulphate with a resulting by-product Hydrochloric Gas which undergoes another processing that produces another finished produced called Hydrochloric Acid which the said company sold 100% to local markets. In reply, please be informed that pursuant to Section 109 (B) of the Tax Code of 1997, as amended, to wit: "SEC. 109. Exempt Transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: (A) . . . (B) Sale or importation of fertilizers ; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets); (emphasis ours) (C) . . ." In view of the foregoing and considering that Muriate of Potash had been issued a Certificate of product Registration by the Fertilizer and Pesticide Authority, Universal Harvester, Inc.'s importation of such fertilizer and the sale to local markets of Hydrochloric Acid shall be exempt from VAT pursuant to the above-cited provision of the Tax Code of 1997, as amended. (VAT Ruling No. 017-04 dated June 02, 2004) 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. ECaITc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service