Importations of Machinery, Equipment and Spare Parts Merely Consigned to a Registered Enterprise Not Subject to the 10% VAT

January 19, 1996 BIR RULING NO. 008-96 101 (a) E.O. 226 000-00 008-96 Philippine Chamber of Commerce and Industry Ground Floor, East Wing, Secretariat Bldg., PICC CCP Complex, Roxas Boulevard Pasay City Attention: Atty . Florencita P . Flores VP for Business Issues Gentlemen : This refers to your letter dated December 27, 1995 requesting confirmation of the following: "1. Importations of equipment, materials and/or supplies that are merely consigned will not be subject to the 10% VAT on importations, since by the very nature of consignment, these articles are not intended to remain in the country, but in fact are required to be "reexported" or shipped back" to their country of origin after a certain period of time. cdll "2. Importations thru a customs bonded manufacturing warehouse of raw materials, supplies and spare parts used in the manufacture/assembly of articles for export will likewise not be subject to the 10% VAT on imports. This is because articles imported thru a customs bonded manufacturing warehouse, used or forming part of finished products that are subsequently exported, are not considered as having entered Philippine territory for purposes of customs and national internal revenue laws, rules and regulations." It is represented that the semiconductor industry represented by the Semiconductor Industry Foundation, Incorporated whose membership consists of enterprises engaged in the manufacture/assembly of semiconductors for export are expecting large volumes of importations sometime in the first week of January 1996. In reply thereto, please be informed that the importations of machinery, equipment and spare parts which are merely consigned to a registered enterprise are not subject to the 10% VAT. Moreover, said consigned machinery, equipment and spare parts shall not be subject to restrictions as to period of use provided that the appropriate reexport bond is posted and that the consigned equipment shall be for the exclusive use of the registered enterprise. (Article 39(c) and (f), Title III, Executive Order No. 226, as amended by Republic Act No. 7918) Customs bonded manufacturing warehouse is removed from the jurisdiction of the Philippine Customs Territory. Thus, the raw materials and/or spare parts are deemed not have entered the Philippine Customs Territory and therefore, were never introduced into Philippine Commerce. Accordingly, importations through a customs bonded manufacturing warehouse of raw materials and spare parts used in the manufacture/assembly of products for export are not subject to the 10% VAT. [Sec. 4, 100-2 (a) (5) Revenue Regulations No. 7-95]. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue