BIR Ruling No. 044-14

February 5, 2014 BIR RULING NO. 044-14 Sec. 109 (1) (9) (B); BIR Ruling No. 084-13; BIR Ruling No. 084-12 U and I Enterprises San Rafael IV, Noveleta Cavite 4105 Attention: Ferdinand Gomez CEO Gentlemen : This refers to your letter dated March 22, 2013 requesting for confirmation that the importation of premix enzyme additives for livestock is exempt from Value Added Tax pursuant to Section 109 (1) (B) of the Tax Code, as amended. EcSCHD It is represented that U and I Enterprises with Tax Identification Number 418-249-778-000, is a sole proprietorship operated by Ferdinand Vicente Gomez and registered with the Department of Trade and Industry under Certificate No. 01506648 valid from September 15, 2011 to September 15, 2016; that the Bureau of Animal Industry (BAI) issued a license to operate to U and I Enterprises which is valid from July 25, 2012 to July 24, 2013; that it is importing a premix enzyme additives for livestock from Japan with a brand name "Tajima" which product is registered with the BAI as per BAI Registration No. VRI-13-4922; and that said product is certified by BAI to be duly registered for livestock, poultry and aquaculture feeds use only, to wit: Name of Brand (If Packaging BAI BAI License Dosage Product Any) Registration No. Form No. PROTEASE, Tajima 15 kg. milk- VRI-13- VDAPDI- Feed RICE BRAN white 4922 12-218 Premix 80%, plastic bag Powder WHEAT 15%, SOYBEAN OIL CAKE AND OTHERS 5% In reply, please be informed that Section 109 (B) of the Tax Code of 1997, as amended, provides: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: 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 ours) xxx xxx xxx The words "ingredients" and "feeds" are defined in Section 3 of RA No. 1556 (An Act to Regulate and Control the Manufacturer, Importation, Labelling, Advertising, and Sale of livestock and poultry feeds), otherwise known as the "Livestock and Poultry Feeds Act", as amended by Presidential Decree (PD) No. 7, provides "Section 3. Definitions. For the purpose of this Act, the following terms shall mean: EAcIST xxx xxx xxx (d) "Feeds" or "Feeding Stuff" shall include all such articles to be used as feeds for the purpose of feeding purporting to supply proteins, carbohydrates, fats, minerals, vitamins, antibiotics and/or correcting nutritional disorders. Such articles may be locally produced or imported, mixed or in the form of simple ingredients. xxx xxx xxx (l) "Ingredients" means any single article of feed or feeding stuff which enters into the composition of a ration, concentrate, or supplement. Corollarily, Section 4 supra states "Section 4. Registration. (a) Any person, partnership, firm, corporation or association desiring to engage in the manufacturer, importation, sale or distribution of feeds or feeding stuffs shall first be registered in the Office of the Director. (b) Applications for registration or annual renewal thereof, shall be made by the person, partnership, firm, corporation or association marketing, manufacturing, or importing such feeds or feeding stuffs, or by his accredited agent in such form and manner as may be prescribed from time to time by regulation. (c) An application for registration shall be accompanied by a registration fee of five pesos for a person, firm, partnership, corporation or association engaged in the retailing or distribution of commercial feeds or feeding stuffs, and one hundred pesos for manufacturers and/or importers of commercial feeds or feeding stuffs. (d) No feeds or feeding stuffs in the form of complete mixture, concentrate, supplement, or ingredients which have not been registered with the Director, shall be manufactured, imported, advertised, sold or offered for sale or held in possession for sale in the Philippines. xxx xxx xxx" Likewise, the Department of Agriculture (DA) in DA Administrative Order No. 12-07 (Revised Implementing Rules and Regulations on the Registration of Feed Establishments and Feed Products) defined the following terms as follows: "Section 2. Definition of Terms. For purposes of these rules and regulations, the following definitions are hereby adopted: EDCIcH xxx xxx xxx 2.28. Feed Additive refers to an ingredient or combination of ingredients which is added to the basic mixed feed to fulfill a specific need which include, but not limited to, acidifiers, antioxidants, aromatics, deodorizing agents, flavour enhancers, mold inhibitors, pellet binders, preservatives, sweeteners, toxin binders, etc. It is usually used in micro quantities and requires careful handling and mixing. A feed additive may have no nutritive value but is added to the feed to improve its quality and efficacy. xxx xxx xxx 2.38. Feed Premix refers to a uniform mixture of one or more micro-ingredients with diluents and/or carrier. Premixes are used to facilitate uniform dispersion of the micro-ingredients in large mix. xxx xxx xxx 2.41. Feed Supplement refers to a feed ingredient or mixture of feed ingredients intended to supply the deficiencies in a ration or improve the nutritive balance or performance of the total mixture. For purposes of this AO, amino acids, fatty acids, vitamins and minerals are considered as feed supplements. xxx xxx xxx" In BIR Ruling 084-2013 dated March 5, 2013, this Office ruled that: "As represented since the above-mentioned products are classified as feed additives, feed premix or feed supplements based on the BAI Certificates of Product Registration, and are primarily used for the production of livestock and poultry feeds, this Office holds that the sale or importation of the above-mentioned feeds ingredients are EXEMPT from VAT pursuant to Section 109 (1) (B) of the Tax Code of 1997, as implemented by Revenue Regulations No. 16-2005, as amended. However, please note that the same shall not be released from customs custody unless a duly approved ATRIG is secured." In view of the foregoing and considering that Tajami Feed Premix Powder Enzymes with 10% Tolerance (Protease, Rice Bran 80%, Wheat 15%, soybean oil cake and others 5%) has been certified by the BAI as a duly registered product for livestock, poultry and aquaculture feeds use, the importation of such additives for livestock feeds shall be exempt from VAT pursuant to the provision of the Tax Code of 1997, as amended. However, please note that the same should not be released from customs custody unless a duly approved Authority to Release Imported Goods (ATRIG) is presented. DAaHET 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue