Aviapor Corporation

November 17, 2009 BIR RULING [DA-(VAT-097) 677-09] Section 109 Aviapor Corporation 432 Roma St., SFV Muzon Taytay, Rizal Attention: Veronica Bilaro President This refers to your letter dated August 13, 2009, requesting exemption from the payment of the value-added tax (VAT) on your importation of Pelltech Feed Additive Powder to be used solely as a feed ingredient, pursuant to Section 109 (1) (B) of the Tax Code of 1997, as amended. It is represented that AVIAPOR CORPORATION, with TIN: 229-738-736-000, is a domestic corporation engaged in the trading of veterinary products such as CARGISELEN and CALCIPAGE used as chicken feeds; that one of the component ingredients of the other poultry feeds it is trading is the Pelltech Feed Additive Powder which originates from Borregard Industry Ltd., Sarpsborgh, Norway; that it is importing the said product to this country three (3) to four (4) times a year; that Pelltech is a feed additive powder used as enhancer that increase production rate; that it is registered in the Bureau of Animal Industry (BAI) under BAI Feed Product Registration No. FA-419 and BAI Registration No. IM-1220. In reply, please be informed that Section 109 (1) (B) of the Tax Code, as amended, provides in part as follows: "(1) Subject to the provisions of subsection (2) hereof, the following transactions shall be exempt from the value added tax: (A) Sale or importation of agricultural and marine food products xxx xxx xxx (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 supplied] AVIAPOR CORP.'s importation of Pelltech Feed Additive Powder to be used solely as a feed ingredient falls squarely within the above mentioned provision. In VAT Ruling No. 011-99 dated January 21, 1999, we ruled that the importation of whey powder certified by the BAI as a feed ingredient to be used for livestock, poultry and agricultural feeds is exempt from the imposition of VAT, viz. : SEHTAC "In reply, please be informed that Section 4 of the Tax Code of 1997 vests upon the Commissioner of Internal Revenue the exclusive power to interpret the provisions of the Tax Code and other tax laws, subject to the review by the Secretary of Finance. Hence, in determining whether or not the importation of a particular commodity is exempt from the imposition of VAT, it is the opinion of the Commissioner of Internal Revenue which shall prevail over that of the Commissioner of Customs. With respect to the VAT exemption of feed ingredients, Section 109(d) of the Tax Code of 1997 provides that the "sale or importation of fertilizers; seeds, seedling 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)", is exempt from value-added tax (VAT). The foregoing provision refers to three transactions as being exempted from VAT, namely: 1. Sale or importation of fertilizers; 2. Sale or importation of seeds, seedling and fingerlings; 3. Sale or importation of 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, cocks, aquarium fish, zoo animals and other animals generally considered as pets). The word "ingredients" or "feed ingredients" is defined under Republic Act No. 1556, as amended by Presidential Decree No. 7, and implemented by Administrative Order No. 35 dated September 23, 1975 as "any single article of food or feeding stuff which enters into the composition of a ration, concentrate, or supplement." In view of the foregoing, the importation of Pelltech Feed Additive Powder used as a feed ingredient is exempt from the imposition of 12% VAT, provided that this Pelltech Feed Additive Powder product is used exclusively for the production of livestock and poultry feeds, and not for specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets nor even for human consumption. This ruling is 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. aCHDST Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service