VAT Imposed on the Freight Billing by an Airfreight Forwarder

April 15, 1988 BIR RULING NO. 139-88 100 103 (j) 000-00 139-88 Gentlemen : This refers to your letter dated January 25, 1988 requesting a ruling as to whether the freight billing by an airfreight forwarder acting as agent of the airlines is subject to the value-added tax. You have represented in your subsequent letter dated February 9, 1988 that you are a sea and airfreight forwarding company; that as such, you issue the airline's Airwaybill and the carrier's Bill of Lading to your clients, for and in behalf of the airline/carrier, to move the cargo; and that the Secretary of Justice has opined that an airfreight forwarded is an indirect air carrier and is considered engaged in air commerce and/or air transportation. In reply, please be informed that your freight billings as an airfreight forwarder are subject to the value-added tax. It will be noted that Section 103(j) of the Tax Code as amended by Executive Order No. 273 exempts from the value-added tax services rendered by persons subject to the 3% percentage tax, e.g., common carriers by land, air or water. It does not include a sea and airfreight forwarder who merely acts as agent of airline/carrier. In your query as to whether your clients who are exporters of marine products are subject to the value-added tax on their freight charges, please be informed that pursuant to Section 100 of the Tax Code, all export sales are subject to 0%. If such exporters are VAT-registered, the export sales shall be zero-rated and the input tax on services related to such zero-rated sales shall be available either as tax refund or tax credit. This means that if they are taxed at 10% on freight charges, they may claim the same as a tax refund or tax credit. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner