10% VAT But Exempt from the Payment of Specific Tax

January 26, 1988 BIR RULING NO. 007-88 100 000-00 007-88 Gentlemen : This refers to your letter dated December 21, 1987 requesting confirmation of your opinion that beginning January 1, 1988, your manufactured flavor products the chief ingredient of which is locally purchased tax-paid alcohol and used as raw materials in the production of food products including non-alcoholic and alcoholic beverages are subject to 10% value-added tax but exempt from the payment of specific tax. It is represented that your company is a wholly-owned subsidiary of International Flavors and Fragrance, Inc., a multinational corporation based in New York, U.S.A.; that it is engaged in the manufacture and sale of flavor products used as raw materials in the production of food products, including non-alcoholic and alcoholic beverages; that the chief ingredient in some of your flavor products, excluding water is alcohol (a distilled spirit) which is locally purchased; and that the specific tax on the alcohol used in the production of said products has been paid by the manufacturer-supplier of alcohol and are passed on to you. In reply, please be informed that your opinion is hereby confirmed. Beginning January 1, 1988, the effective date of the value-added tax law, your sale of manufactured flavor products shall be subject to the 10% value-added tax, pursuant to Section 100 of the Tax Code, as amended by Executive Order No. 273. Moreover, since some of said flavor products fall under the term "other preparations" and that the chief ingredient thereof, excluding water, is ethyl alcohol, a distilled spirit, the same is subject to specific tax as such distilled spirit, pursuant to Section 138(c) of the Tax Code, as amended by Executive Order No. 273. However, since the specific tax on distilled spirit used in the manufacture of the flavor products has already been paid, no further specific tax is payable on said product. (BIR Ruling No. 304-87) cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner