10% VAT Assessed and Collected on Every Importation of Goods

April 17, 1990 BIR RULING NO. 062-90 101 (a) 000-00 062-90 Gentlemen : This refers to your letter dated November 28, 1989 to the Bureau of Customs which was referred to this Office for a resolution of the issue whether your importation of logs could be released from customs custody if covered by a re-export bond to answer for your VAT liability in the event that the finished products produced from said logs are not re-exported. cdta It is represented that the bond shall be equivalent to 150% of the computed VAT; that the processed finished product shall be re-exported within six (6) months from the date of acceptance of the import entry; and that the waste products shall be condemned or destroyed, otherwise, it shall be subject to 10% VAT. In reply, please be informed that your request cannot be granted for lack of legal basis. Pursuant to Section 101(a) of the Tax Code, 10% VAT is assessed and collected on every importation of goods and that the same is collected upon release from customs custody. Under the concept of bonded manufacturing warehouse, the importation of articles brought to the Bonded Manufacturing warehouse, for processing and re-exportation, is not yet complete; hence, no tax consequence results as long as the imported article remains therein within the prescribed period of time. Since, by virtue of CMC No. 166-89, you are no longer allowed to operate a Bonded Log Pond, which is the equivalent of the Bonded Manufacturing Warehouse, it cannot be said that your imported logs are being processed within a Bonded Manufacturing Warehouse. In other words, since the processing of the logs is done in the so called "customs territory", the importation of logs is said to be complete, hence, the same shall be subject to VAT pursuant to Section 101(a) of the Tax Code. Very truly yours, (SGD.) JOSE U. ONG Commissioner