10% VAT Imposed on the Importation of Pneumatic Products

April 18, 1988 BIR RULING NO. 142-88 101 (a) 000-00 142-88 Gentlemen : This refers to your letter dated February 18, 1988 requesting authority to release from customs custody without payment of the corresponding sales tax your importation of pneumatic products which are allegedly exclusively imported for Atlas Consolidated Mining and Development Corporation (Atlas). You also seek the approval of this Office not to indicate the 10% value-added tax on the special invoice you will issue to said company as well as suspension of payment of the value-added tax. It is represented that you are a company engaged in import/re-export of pneumatic elements which you supply to your customers, together with electronic Control Engineering products; that you also render technical know-how in control engineering systems in relation to your products and offer training seminar to all Filipino-owned companies and institutions; and that presently, Atlas is willing to buy pneumatic cylinder from you at a total cost of approximately P3M but you do not want to bill or pass on the corresponding sales tax to said buyer in view of LOI No. 1416 which allows suspension of payment of all taxes, duties, fees, imposts and other charges, whether direct or indirect, due and payable by copper mining companies. In reply, I regret to inform you that your request cannot be granted for lack of legal basis. Pursuant to Section 101(a) of the Tax Code as amended by Executive Order No. 273, a value-added tax of 10% is imposed on every importation of goods, such tax to be paid by the importer prior to release of such goods from customs custody . Consequently, as importer of Festo pneumatic products you are the one directly liable to the 10% value-added tax. However, you are entitled to credit the input tax which you have paid on your importation of pneumatic products against the output tax on your domestic sale of goods to Atlas. Atlas, on the other hand, may request for suspension of payment of the tax you will pass on to it which request shall be processed by the Agriculture and Natural Resources Division, this Bureau, pursuant to Revenue Memorandum Order No. 9-86 dated May 12, 1986. It may be stated in this connection that in case the value-added tax on your domestic sale to Atlas is not billed separately in the invoice, the total invoice amount shall be multiplied by the factor 1/11 to arrive at your output tax. (Section 6, Revenue Regulations No. 5-87) aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner