Milestone Petroleum Marketing Corporation

July 29, 2009 BIR RULING [DA-(VAT-072) 415-09] RR 4-2007; DA-066-08, VAT Ruling No. 010-2005, DA-133-07 Milestone Petroleum Marketing Corporation Unit 501 Textron Building #168 Luna Mencias Street San Juan, Metro Manila Attention: Rosalina M. Bustamante Vice President and General Manager Gentlemen : This refers to your letter dated May 19, 2009 requesting for confirmation of your opinion that the sales of goods and/or services by VAT-registered suppliers, to their various PEZA-registered customers are subject to value-added tax (VAT) at zero percent (0%) rate and that the input tax on purchases of goods or services related to such zero-rated sale incurred by the supplier of goods shall be available as tax credit or refund in accordance with the Revenue Regulations No. 16-2005 as amended by Revenue Regulations No. 4-2007. It is represented that Milestone Petroleum Marketing Corporation (MPMC) is a domestic corporation with principal office address at Unit 501 Textron Building, #168 Luna Mencias Street, San Juan, Metro Manila; that it is a VAT-registered taxpayer engaged in the trading and distribution of petroleum products; that for the taxable year 2005, it sold petroleum products to the following PEZA Ecozone Export Enterprises (a) SS Ventures International, Inc., (PEZA Certificate of Registration No. 06-36); (b) Vinox Corporation, (PEZA Certificate of Registration No. 99-061); (c) Showa Aluminum Manufacturing Phils. Corporation (PEZA Certificate of Registration No. 96-007); (d) Enlin Steel Phils. Corp. (PEZA Certificate of Registration No. 94-29); and Cavite Apparel Corporation (PEZA Certificate of Registration No. 89-09); and that MPMC filed a claim for refund in the form of tax credit the input tax on purchases of petroleum products sold to the aforementioned zero-rated registered taxpayers. In reply, please be informed that Section 106 (A) (2) (a) (5) of the National Internal Revenue Code of 1997, as amended by Republic Act 9337, provides: "SEC. 106. Value-added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. . . . (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) . . . (5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws;" The abovecited provision is implemented by Section 4.106-5 (a) (5) of Revenue Regulations (Rev. Regs.) 16-2005, as amended by Rev. Regs. 4-07, which states in part that: "SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. . . . The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. . . . (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. "Considered export sales under Executive Order No. 226" shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; . . . Provided, further, That pursuant to E.O. 226 and other special laws, even without actual exportation, the following shall be considered constructively exported: (1) . . .; (2) sales to export processing zones pursuant to Republic Act (R.A.) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones; (3) . . . (4) . . . (5) . . ." (emphasis ours) From the foregoing, it is clear that the sale of goods to PEZA-registered enterprises by VAT-registered suppliers in the Customs Territory, is treated in law as export sales, and thus entitled to the benefit of zero percent (0%) VAT. Accordingly, this Office confirms your opinion that the sale of petroleum by MPMC to SS Ventures International, Inc., Vinox Corporation, Showa Aluminum Manufacturing Phils. Corporation, Enlin Steel Phils. Corp., and Cavite Apparel Corporation is subject to VAT at zero percent (0%) rate. Further, the input tax on purchases of goods or services related to such zero-rated sale incurred by MPMC shall be available as tax credit or refund in accordance with the provisions of RR 4-2007. 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