Marine Benefits Assistance Services, Inc.

July 27, 2009 BIR RULING [DA-(VAT-071) 408-09] 108 (B) (2); 110; 112; VAT 238-89; 025-2001 Marine Benefits Assistance Services, Inc. Suite 1901-1902 The Peak Condominium 107 L.P. Leviste St., Salcedo Village Makati City Attention: Mr. Leif Moen General Manager Gentlemen : This refers to your letter dated October 7, 2008 requesting a ruling on whether the sale of services by Marine Benefits Assistance Services, Inc. ("MBAS Inc. Phils." for brevity) to its foreign client, Marine Benefits Services AS (MBS As) Norway ["MBS As Norway" for brevity], paid for in foreign currency, is subject to value-added tax (VAT) at zero percent (0%) rate. The facts as represented are as follows: MBAS Inc. Phils. is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) on October 8, 2007. Its primary purpose is to establish, operate, maintain and carry on the business of providing general support services to companies supplying social benefit(s) programs to persons or entities engaged in the international marine and maritime industry, including but not limited to the evaluation of benefits and claims of the beneficiaries of such programs; and assistance and facilitation of the handling and processing of such claims, and to do and perform such other services, acts and things necessary or incidental to the accomplishment of the foregoing corporate business and objects insofar as may be allowed by law. MBAS Inc. Phils. is a VAT-registered taxpayer. MBS As Norway, on the other hand, provides general support services to Marine Benefits As ("MB As" for brevity), a non-resident foreign corporation organized under the laws of Norway and was certified by the Financial Supervisory Authority of Norway in January 2007 as insurance agent, which represents an international group of Companies providing a range of benefits and welfare programs for shipboard employees in the international shipping industry. MBS As Norway entered into a service agreement with MBAS Inc. Phils. whereby the latter will provide services such as but not limited to: a) 24/7 call center service for clients of MBS As Norway; b) Medical assessment of claims reported; c) Registration of members of medical plans administered by MBS As Norway; d) Preparation of invoices for membership in medical plans. The above services provided by MBAS Inc. Phils. are performed by highly skilled Filipino professionals from various fields of expertise like doctors and nurses for health care, IT and business experts. As consideration for MBAS Inc. Phils. services to be performed in the Philippines, MBAS Inc. Phils. will be paid in US Dollars by MBS As Norway and which amount will be remitted from Norway into the Philippine banking system and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). In reply thereto, please be informed that Section 108 (B) (2) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337 provides, viz. : "SEC. 108. Value Added Tax on Sale of Services and Use or Lease of Properties. . . . (B) Transaction Subject to Zero Percent (0%) Rate The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate. xxx xxx xxx (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) ;" (Emphasis supplied) Considering that MBAS Inc. Phils. is a VAT-registered person, the service fees it received from MBS As Norway, a foreign company, for the various services it renders to the latter, and which are being paid for in foreign currency and remitted through bank to bank transaction in accordance with the rules and regulations of the BSP, are subject to VAT at zero percent (0%) rate. (VAT Ruling No. 238-89 dated September 15, 1989 & VAT Ruling No. 025-2001 dated May 17, 2001) Moreover, Section 110 (B) of the Tax Code of 1997, as amended, in relation to Section 112 thereof, MBAS Inc. Phils. is entitled to input tax credits on its purchases of goods for use as supplies in the course of its business and for purchases of service for which value added tax has been actually paid by it. Accordingly, MBAS Inc. Phils. may claim its input tax credits within two (2) years after the close of the taxable quarter when the sales were made. 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