Request for Tax Exemption under Republic Act No. 7471, Otherwise known as the Philippine Overseas Shipping Development Act

April 26, 1994 BIR RULING NO. 099-94 R.A. 7471 24 (a) 103 000-00 099-94 Eastern Shipping Lines, Inc. Eastern Shipping Lines Bldg. Anda Circle, Port Area Manila Attention: Mr . Erwin L . Chiongbian Executive Vice President Gentlemen : This refers to your letter dated February 21, 1994, in effect, requesting for tax exemption under Republic Act No. 7471, otherwise known as the Philippine Overseas Shipping Development Act. cdta It is represented that the Eastern Shipping Lines, Inc. is a domestic corporation engaged in overseas shipping; that it is a Maritime Industry Authority (MARINA) accredited enterprise; and that all your vessels are certified by MARINA to be Philippine-registered and engaged in the international trade. In reply, please be informed that under Revenue Regulations No. 15-93 dated September 1, 1993, implementing Republic Act No. 7471, you shall be exempt from income tax on your overseas shipping income and from the value-added tax on your importations of vessels and spare parts. However, your exemption from the payment of income tax shall be subject to your compliance of the following conditions: 1. Your income should be derived directly and exclusively from overseas shipping, i. e. income derived from your transport of goods and/or passengers overseas; 2. Your entire net income, less 10% thereof for distribution of profits or declaration of dividends, shall be reinvested for the construction, purchase, or acquisition of vessels and related equipment, and for the improvement or modernization of your vessels and related equipment not later than May 5, 2005; and 3. The cumulative amount so reinvested shall not be distributed as profits or dividends until after May 5, 2012, or until the vessel or related equipment so acquired have been fully paid, whichever date comes earlier. On the other hand, your exemption from the payment of value-added tax on your direct importation of vessels and spare parts, shall, likewise be subject to the following conditions: 1. The imported vessels are intended for overseas shipping. 2. The vessels are intended for registration in the Philippines (registration under Philippine flag); 3. The imported spare parts are intended for the repair and/or overhaul of the vessels used in overseas shipping and registered under Philippine flag; 4. The imported spare parts are destined to a Philippine drydocking or repair facility which is accredited by MARINA and registered as a customs-bonded warehouse; 5. The imported spare parts are to be installed to Philippine registered vessels which are used in overseas shipping for the transport of cargo or passengers; 6. Availment of this privilege shall be initiated by way of an application filed with the Bureau of Customs copy furnished the Bureau of Internal Revenue; and 7. After verification of your VAT exemption eligibility the Bureau of Customs shall then issue authority to release imported goods, without collecting the value-added tax. Pursuant to Section 3(b) of Revenue Regulations No. 15-93, you may also purchase VAT-exempt machinery, equipment, materials and spare parts from local manufacturers or dealers. The sellers shall be allowed to claim a suppliers' tax credit for the full amount of the value-added tax actually paid or added to the cost of producing or importing the same. The amount covered by suppliers' tax credit certificate shall be a deduction from the input tax credit of said manufacturers or dealers. cdtech Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner Officer-in-Charge