Exemption from VAT of the Shipment of Fortified Canadian First Grade Spray Skimmed Milk

March 16, 1988 BIR RULING NO. 094-88 103 (u) 000-00 094-88 Gentlemen : This refers to your letter dated February 16, 1988 requesting exemption from the value-added tax (VAT) of the shipment of 32 metric tons of fortified Canadian First Grade Spray Skimmed milk from the Canadian International Development Academy (CIDA) to the Salvation Army of the Philippines. You contended that CIDA's programme of milk distribution falls under the terms and conditions of the General Bilateral Agreement between the Government of Canada and the Government of the Republic of the Philippines which renders it unconditionally exempt from all duties and taxes; and that CIDA milk programme is premised on an unconditional duty and tax exemption for said goods and unless received as such, the Philippines will be disqualified from the Milk Programme. In reply, please be informed that pursuant to Section 103(u) of the Tax Code as amended by Executive Order No. 273 and implemented by Section 9(b)(16) of Revenue Regulations No. 5-87, transactions which are exempt under international agreements to which the Philippines is a signatory, are exempt from the value-added tax. The General Agreement on Development Cooperation between the Governments of Canada and the Philippines partakes the nature of an international agreement. Such being the case, the aforesaid goods which are intended as donation from Canadian Government and consigned to the Salvation Army for distribution to the malnourished children of the Philippines are exempt from the 10% value-added tax. This serves as a certification authorizing the Salvation Army of the Philippines to secure the release from customs custody the aforesaid 32 metric tons of fortified Canadian First Grade Spray Skimmed Milk without payment of the 10% value-added tax. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner