Services Contracted by BOI-Registered Enterprise Subject to 0% VAT

July 15, 1999 BIR RULING NO. 106-99 Sec. 108 (B) (5)-015-97 dated February 21, 1997-106-99 SVI Global Services Corporation 11/F, The Orient Square Emerald Avenue, Ortigas Center Pasig City Attention: Ms . Ma . Josefina M . Reyes Treasurer Gentlemen : This refers to your letter dated June 15, 1999 stating that SVI Global Services Corporation (SVI GSC) is a wholly owned subsidiary of Software Ventures International Corporation (SVI); that SVI GSC is a company that renders technical consultation and/or management services in connection with electronic data processing problems, needs and requirements, computer programming procedures, systems, analyses and design; that SVI GSC is currently a subcontractor to SVI in relation to its project with Morgan Stanley Japan Limited (MSDW), a corporation with principal place of business at Tokyo, Japan; that as such, SVI GSC provides services in the performance of systems analysis, design, programming, and other related functions on behalf of SVI necessary to support the systems of MSDW; and that SVI is presently registered with the Board of Investments (BOI) as an export producer of computer software with export sales of more than 70% of its total revenue. Based on the foregoing, you now request for a ruling as to whether or not the services rendered by SVI GSC to SVI is subject to zero percent (0%) pursuant to Section 108(B)(5) of the Tax Code of 1997. In reply, please be informed that Section 108(B)(5) of the Tax Code of 1997 provides that services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production shall be subject to value-added tax at zero percent (0%) rate. llcd Accordingly, the services contracted by SVI, a BOI registered enterprise as an export producer of computer software and whose export sales exceed 70% of its total production, shall be subject to zero percent (0%) provided that SVI has an approved application for zero-rating and that at least 70% of its finished products are exported. (BIR VAT Ruling No. 015-97 dated February 21, 1997) 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.) BEETHOVEN L. RUALO Commissioner of Internal Revenue