Radaza Law Office

February 24, 2017 BIR RULING NO. 071-17 Section 109 (1) (T) of the 1997 Tax Code, as amended; Revenue Regulations No. 15-2015; BIR Ruling No. 092-2016 Radaza Law Office Suite 501 Legaspi Tower 200 107 Paseo de Roxas, Legaspi Village Makati City 1229 Attention: AAA Gentlemen : This refers to your letter dated February 6, 2017, requesting on behalf of Gothong Southern Shipping Lines, Inc. ,for a Certificate of Value-Added Tax (VAT) Exemption on its importation of one (1) unit, 2004-built, steel-hulled vessel named " BBC Bulgaria ," pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. Documents submitted show that Gothong Southern Shipping Lines, Inc. (TIN: 000-000-000-000) is a domestic corporation registered with the Securities and Exchange Commission (SEC),with Company Registration No. CS200525570; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in Domestic Shipping Business based on the MARINA Certificate of Accreditation No. 2006-003-403-2016 CEB valid for a period of three (3) years from January 30, 2017 to January 29, 2020; that Gothong Southern Shipping Lines, Inc. is importing one (1) unit, 2004-built, steel-hulled vessel named " BBC Bulgaria ," more particularly described as follows: Name BBC Bulgaria Call Sign ZDGK3 IMO No. 9302061 Flag Gibraltar Place of Registration Gibraltar Ship Type Cargo Year Built 2004 Country Built Bulgaria Dead Weight 4310 Gross Tonnage 3198 Net Tonnage 1725 Main Engine MaK 6M32C that MARINA has approved the importation of the above-described vessel in its letter dated January 27, 2017; and that based on the Affidavit of Undertaking dated February 1, 2017 executed by BBB of Gothong Southern Shipping Lines, Inc. ,the subject vessel will be used exclusively by the company for its domestic transport operation business. In reply, please be informed that Section 109 (1) (T) of the NIRC of 1997, as amended, provides as follows: " Sec. 109. Exempt Transaction. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax. (T) 1 Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations." Based on the above-cited provision, the importation, among others, of a cargo vessel destined for domestic transport operations shall be exempt from VAT. In relation thereto, Section 4.109-1 (B) (1) (t) of Revenue Regulations (RR) No. 16-2005, as amended by RR No. 15-2015, which implements the above-quoted provision, provides: EcTCAD "SECTION 4.109-1. VAT-Exempt Transactions. xxx xxx xxx (B) Exempt transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (t) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations; Provided, however, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be subject to the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA." Considering that Gothong Southern Shipping Lines, Inc. has been issued by MARINA with the required authority to import BBC Bulgaria ,its importation is deemed compliant with MARINA's requirements on restriction on vessel importation and mandatory vessel retirement program. Accordingly, the importation by Gothong Southern Shipping Lines, Inc. of the vessel, BBC Bulgaria , shall be exempt from VAT pursuant to Section 109 (1) (T) of the NIRC of 1997, as amended. The VAT exemption, however, shall be subject to the strict compliance of the conditions contained in the letter of approval issued by MARINA for the importation of the above-described vessel. 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.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Renumbered by Republic Act No. 10378.