Archipelago Philippines Ferries Corporation

April 22, 2016 BIR RULING NO. 146-16 Section 109 (1) (T) of the 1997 Tax Code, as amended; Revenue Regulations No. 15-2015; BIR Ruling No. 092-2016 Archipelago Philippines Ferries Corporation 5B Unioil Bldg. Commerce Ave. cor. Acacia Ave. Ayala, Alabang Attention: Segundo C. Mentoya, Jr. General Manager Gentlemen : This refers to your letter dated January 15, 2016, requesting on behalf of Archipelago Philippines Ferries Corporation , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of two (2) passenger vessels, namely, M/V Fast Cat M10 and M/V Fast Cat M11 , pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. Documents submitted show that Archipelago Philippines Ferries Corporation (TIN: 223-662-279-000) is a domestic corporation registered with the Securities and Exchange Commission (SEC), with Company Registration No. CS200309056; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in Domestic Shipping Business based on the MARINA Certification No. DSS-2006-003-112 (2015) dated November 6, 2015; and that Archipelago Philippines Ferries Corporation is currently importing two (2) brand new passenger vessels, more particularly described as follows: Vessel's Name Fast Cat M10 Fast Cat M11 Vessel's Type RORO Passenger RORO Passenger Catamaran Ferry Catamaran Ferry Flag Philippines Philippines Port of Registry Port of Batangas Port of Batangas IMO Number 9745419 9768473 Overall Length 49.79 M 49.79 M Reg. Breadth 17.5 M 17.5 M Reg. Depth 4.20 M 4.20 M Gross Tonnage 704 704 Net Tonnage 212 212 Main Engines 4 x Yanmar 6AY- 4 x Yanmar 6AY- WST 485kW WST 485kW @ 1900rpm @ 1900rpm Steering System 1 x RIQ/Kobelt OED- 1 x RIQ/Kobelt OED- Custom-1.26-1.35 Custom-1.26-1.35 Main Gen-Set 1 x Cummins 1 x Cummins YP65MXDG 55eKw YP65MXDG 55eKw @ 1800rpm @ 1800rpm Harbor Generator 1 x Cummins 1 x Cummins YP65MXDG 55eKw YP65MXDG 55eKw @ 1800rpm @ 1800rpm Hull Material High Tensile Steel High Tensile Steel Place of Guangdong Bonny Marine Expert Building/Shipyard Fair Heavy Industry (Zhaoqing) Xijiang Ltd. Shipyard Classification ABS +A1 HSC, ABS +A1 HSC, RO/RO Passenger RO/RO Passenger Ferry, [+] AMS Ferry, [+] AMS Philippine Inter-Island Philippine Inter-Island Service with Service with description description "Catamaran Ferry, "Catamaran Ferry, Maximum Significant Maximum Significant Wave Height 4m" Wave Height 4m" Builder's Hull APFC-HY-2209 APFC-HY-2205 Number Keel-Laid Date 1st November 2013 23rd December 2014 Launch Date 1st July 2014 that MARINA has approved the importation of the above-described vessels in its two (2) letters dated March 30, 2015 and May 11, 2015; that based on the Affidavit of Undertaking dated January 18, 2016 executed by the Company's General Manager, Segundo C. Mentoya, Jr., the subject vessels are directly imported by the company; and that the same are reasonably needed and will be used exclusively by the company in its transport operations. TAIaHE In support of its request for exemption, Archipelago Philippines Ferries Corporation has submitted the following documents: 1. Certified true copies of the SEC Certificate of Registration, Articles of Incorporation and By-Laws; 2. Certified true copies of the MARINA Authority to Import; 3. Certified true copies of the Builder's Certificates; 4. Certificate of Registration with MARINA; 5. BIR Certificate of Registration; and 6. Other documents. In reply, please be informed that Section 109 (1) (T) of the NIRC of 1997, as amended, provides as follows: "Sec. 109. Exempt Transactions. 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 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: 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 Fast Cat M10 and M/V Fast Cat M11 are all brand new vessels and have been issued by MARINA with the required authority to be imported. Hence, the importation of said vessels by Archipelago Philippines Ferries Corporation is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by Archipelago Philippines Ferries Corporation of M/V Fast Cat M10 and M/V Fast Cat M11 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 above-described vessels. cDHAES 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Renumbered by Republic Act No. 10378.