Robinsons Land Corporation

December 18, 2008 BIR RULING [DA-(VAT-057) 552-08] Sec. 108 (B) (4); RR 16-05 & 4-07; DA-374-07 Robinsons Land Corporation Commercial Centers Division Level 2, Galleria Corporate Center Robinsons Galleria, EDSA cor. Ortigas Avenue Quezon City Attention: Mr. Frederick D. Go President & CEO Gentlemen : This refers to your letter dated October 3, 2008 requesting confirmation of your opinion that the sale of services by Robinsons Land Corporation (Hotel Group) ["RLC"] to persons engaged exclusively in international air transport operations, like Etihad Airways ( i.e. , Etihad), which are paid for in U.S. dollars, is subject to the value-added tax (VAT) at zero percent (0%) rate. ADSTCa The facts as represented are as follows: RLC is a domestic corporation duly organized and existing under the laws of the Philippines having as its primary purpose, to engage in, among others, the business of selling, acquiring, building, constructing, development, leasing, disposing of real properties such as land, buildings, shopping malls, commercial centers, housing projects of all types, hotels, motels, and other variants, mixed-use property projects, infrastructure projects, and property development of all kinds and nature. RLC is a VAT-registered company. Etihad, on the other hand, is a public joint stock company established by Emiri Decree #1 of 2003 in the Emirate of Abu Dhabi. Etihad is the National Airline of the United Arab Emirates, with Abu Dhabi, the capital of the UAE, as its hub. Etihad is engaged exclusively in international air transport operations. In your supplemental letter dated December 15, 2008, it is stated that RLC renders hotel services to international airlines, like Etihad. Hotel services as stated in your said letter means, "availment of services like providing for living/sleeping quarters, food and hotel facilities, land transport services and other services being rendered by RLC in connection with the international airlines' international air transport operations. Such services may be rendered to the airline's cabin and cockpit crew, technical/support personnel, as well as, passengers during flight interruptions. AcHEaS From the foregoing, it is your opinion that the sale of the aforementioned hotel services by RLC to international airlines which are engaged exclusively in international air transport operations, like Etihad, are subject to zero-rated VAT in accordance with Section 108 (B) (4) of the National Internal Revenue Code of 1997, as amended. In reply thereto, please be informed as follows: Section 108 (B) (4) of the Tax Code of 1997, as amended, provides that "services performed in the Philippines by VAT-registered persons to persons engaged in international shipping or international air transport operations, including leases of property for use thereof, is subject to VAT at zero percent (0%) rate." It is apparent from the foregoing that in order to qualify for VAT zero-rating, the services should be performed in the Philippines. Accordingly, considering that the hotel services of RLC, a VAT-registered entity, are services performed in the Philippines and that the international airlines, i.e. , Etihad, is engaged exclusively in international air transport operations, such hotel services rendered by RLC in their favor, therefore, are subject to VAT at zero percent (0%) rate (Sec. 4.108-5 (b) (4) RR 16-05; Sec. 12, RR 4-07; BIR Ruling No. DA-374-2007 dated July 12, 2007). Conversely, services being rendered by RLC not in connection with the international airlines' international air transport operations, shall be subject to VAT at the rate of 12%. 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