Tax Consequences in the Export of Gold Ingots in the Light of Certain Provisions of Central Bank Circular No. 1389

June 7, 1994 BIR RULING NO. 113-94 100 (a) 000-00 113-94 Goldward Resources 4936 Enrique St. Palanan, Makati Metro Manila Attention: Mr . Edward B . Golden General Manager Gentlemen : This refers to your letter dated January 28, 1994, requesting for a clarification of the tax consequences in the export of gold ingots in the light of certain provisions of Central Bank Circular No. 1389 dated April 13, 1989 specifically stating cdt "1. Gold in any form, other than panned gold which can only be sold directly to the Central Bank, can be exported without need of any permit or clearance from the Central Bank. "2. Likewise, no taxes are required in the export of the aforementioned commodity." In reply, please be informed that under existing mining practice in the country, gold ingots (or gold bars) are produced only by mining companies engaged in the integrated activity of quarrying and processing mineral ores. Metallic minerals are subject to 5% excise tax based on the actual market value of the gross output thereof at the time of removal, in the case of locally extracted or produced, or the value used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, in the case of importation. Gross output means the "actual market value of minerals or mineral products or of bullion from each mine or mineral lands operated as a separate entity without any deduction from mining, milling, refining (including all expenses incurred to prepare the said minerals or mineral products in a marketable state) as well as transporting, handling, marketing or any other expenses: Provided, that if the minerals or mineral products are sold or consigned abroad by the lessee or owner of the mine under C.I.F. terms, the actual cost of ocean freight and insurance shall be deducted: Provided, however , that in the case of mineral concentrate not traded in commodity exchange in the Philippines or abroad such as copper concentrate, the actual market value shall be the world price quotations of the refined mineral products content thereof prevailing in the said commodity exchanges, after deducting the smelting, refining and other charges incurred in the process of converting the mineral concentrates into refined metal traded in those commodity exchanges". (Sec. 151(a) (3) & (b) (1), Tax Code) In addition to the excise tax on gold ores imposed under Section 151 of the Tax Code, when gold ingots are sold to the Central Bank, these are again subject to 10% VAT based on the gross selling price thereof at the time of sale pursuant to Section 100 of the Tax Code. In other words, sale of gold to the Central Bank is not considered export sale under Section 100 (a) (2) of the same Code as held under VAT Ruling No. 08-92 dated January 23, 1992 which revoked earlier rulings stating the contrary rule. However, if the gold ingots are actually exported by the mining company or by the producer thereof, it is a zero-rated pursuant to Section 100 (a) (2) of the Tax Code. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue