Taxability of Imported Articles and of a Manufacturer-Exporter

November 3, 1966 BIR RULING NO. 054-66 OERLIKON (PHIL.) ELECTRODES P.O. Box 3822 M a n i l a Attention : Mr . M . S . Reyes} Manager Gentlemen : This refers to your letter dated May 12, 1966, stating the following: cdi "We have received offers abroad for the supply of welding electrodes which we manufacture. "Considering that this will be our initial venture in the export business, kindly enlighten us on these matters: "1. Are imported raw materials used in the conversion of goods intended for export subject to advance sales tax and monthly percentage tax? "2. If raw materials imported previously taxed are subsequently converted into a finished product for export, shall we be entitled to a refund for advance sales tax and percentage tax paid? This presupposes that raw materials for export as finished product are tax exempt. If so, what will be the procedures involved in the claim for refund? "3. If raw materials imported in the manufacture of goods are intended for both domestic and foreign consumption, what will be the procedures for release in the customs custody, taxation wise? "4. Are there prior licenses, permits, registrations and/or any other fees to be paid to your office before an entity can actually engage in export?" In reply, I have the honor to inform you as follows: Pursuant to Sections 183(b) and 190(c) of the Tax Code, imported articles to be used by the importer himself in the manufacture or preparation of articles for consignment abroad are exempt from the advance sales or compensating tax. And under Section 188(e) of the same Code, articles shipped or exported abroad by the manufacturer or producer, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported are exempt from the sales tax. In order to be exempt under the provisions of Section 183(b) and 190(c) of the Tax Code, the imported articles must be earmarked for the manufacture or preparation by the importer himself of articles also earmarked for export. Imported articles not so earmarked are subject to the advance sales or compensating tax, and the subsequent exportation of the articles manufactured therefrom by the importer himself will not give rise to the refund of the advance sales or compensating tax paid thereon. A manufacturer-exporter is subject only to the P20.00 fixed tax per annum prescribed by Section 182(A)(1) of the Tax Code. The regulation of exports is not, however, within the province of this office. It is suggested that you take the matter up with the Central Bank and/or the Department of Commerce and Industry. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue