Southwest Premiere Ferries, Inc.

March 3, 2017 BIR RULING NO. 101-17 Section 109 (1) (T), NIRC; RR No. 15-2015; BIR Ruling No. 289-16 Southwest Premiere Ferries, Inc. Rm. 508 5/F S&L Bldg.,1500 Roxas Blvd., Brgy. 668, Zone 072 Ermita, Manila 1009 Attention: AAA _______________ Gentlemen : This refers to your letter dated January 13, 2017, requesting on behalf of Southwest Premiere Ferries, Inc. , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of a brand new Ro-Ro (roll-on, roll-off) type passenger ferry ship, pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. Documents submitted show that Southwest Premiere Ferries, Inc. ,with Tax Identification No. 000-000-000-000, is a domestic corporation registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS201616367; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in domestic shipping business per MARINA Certification dated August 15, 2016 valid until August 14, 2019; and that Southwest Premiere Ferries, Inc. is currently importing one (1) brand new RO-RO type passenger ferry ship which is particularly described as follows: Vessel's Name M/V "SWM Stella Del Mar" Dimensions Length, (overall) Length (between perpendiculars) Breadth (molded) Depth (promenade deck molded/car deck) Draft (designed draft molded) approx. 66.80m 61.80m 15.30m 9.40m/4.40m 3.22m Gross tonnage (International) abt. 2,650 M.T. Deadweight on designed draft abt. 600 M.T. Carrying Capacity Complements: Officer/Crew: Passenger: Number of Cars: 807 Persons 16 Persons 791 Persons 19 + 2 Trucks Main Engine Maker Model M.C.O. N.C O. Number of Engine Yanmar Diesel Co. Ltd. Yanmar 6EY 22AW 1,370 kW (1860 ps) 1,164 kW (1581 ps 85% of M.C.O.) 2 Sets Trial Maxim Speed Service Speed (85%MCO/15%SM) 14.5 Knots abt. 13.5 knots that MARINA has approved the importation of the above Ro-Ro vessel in its letter dated January 12, 2017 addressed to Southwest Premiere Ferries, Inc. ;and that per Sworn Statement dated January 24, 2017 executed by BBB, _______________ of Southwest Premiere Ferries, Inc. ,the subject vessel cannot be manufactured domestically in a comparable quality, using the same technology, and at a reasonable price, and that it is reasonably needed by the domestic roro market, and will be used exclusively by the Corporation for its operations. CAIHTE In support of its request for exemption, Southwest Premiere Ferries, Inc. has submitted the following documents: 1. Certified true copies of the SEC Certificate of Registration, Articles of Incorporation and By-Laws; 2. BIR Certificate of Registration; 3. Certificate of Registration with MARINA; 4. Certified true copy of the MARINA Authority to Import; 5. Shipbuilding Contract; and 6. Sworn Statement dated January 24, 2017. In reply, please be informed that Section 109 (1) (T) of the NIRC of 1997, as amended, provides as follows: " Sec. 109. Exempt Transactions . (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 passenger vessel destined for domestic transport operations shall be exempt from VAT. In relation thereto, Section 4.109-1 (B) (1) (t) of the Revenue Regulations (RR) No. 16-2005, as amended by RR No. 15-2015, which implements the above-quoted provision, provides: "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: DETACa 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." It is noted that M/V "SWM Stella Del Mar" is a brand new vessel and has been issued by MARINA with the required authority to be imported. Hence, the importation of the said vessel by Southwest Premiere Ferries, Inc. is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by Southwest Premiere Ferries, Inc. of M/V "SWM Stella Del Mar" 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 subject 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.