Seen Sam Shipping, Inc.

April 22, 2016 BIR RULING NO. 147-16 Section 109 (1) (T), NIRC; RR No. 15-2015 Seen Sam Shipping, Inc. Seen Sam Bldg. Nasipit Talamban, Cebu City Attention: Ms. Lynette G. Dy Hian To President Gentlemen : This refers to your letter dated October 19, 2015 requesting on behalf of Seen Sam Shipping, Inc. , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of five (5) units of newly-built vessels pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. Documents submitted show that Seen Sam Shipping, Inc. , with Tax Identification No. 203-272-015, is a domestic corporation registered with the Securities and Exchange Commission (SEC) under Company Registration No. C199900785; that Seen Sam Shipping, Inc. is importing five (5) brand new cargo vessels which are more particularly described as follows: Vessel Minghang Minghang Minghang Minghang Minghang Name 62 63 54 64 53 Kind Self- Self- Self- Self- Self- propelled propelled propelled propelled propelled Deck Barge Deck Barge Deck Barge Deck Barge Deck Barge Builder's SC2014-10 SC2014-11 SC2014-06 SC2014-12 SC2014-05 Hull No. Main Two (2) sets Two (2) sets Two (2) sets Two (2) sets Two (2) sets Engine Chongqing Chongqing Chongqing Chongqing Chongqing Weichai Weichai Weichai Weichai Weichai 6200 ZC 6200 ZC 6200 ZC 6200 ZC 6200 ZC 540 540 KW 540 KW 540 KW 540 KW KW Class ZC ZC ZC ZC ZC Length 70.00M 70.00M 70.00M 70.00M 70.00M Overall Breadth 18.00M 18. 00M 18. 00M 18. 00M 18. 00M Mld Depth 4.50M 4.50M 4.50M 4.50M 4.50M Mld Gross 528 528 528 528 528 Tonnage Net 370 370 370 370 370 Tonnage Place of Yangzhou Yangzhou Yangzhou Yangzhou Yangzhou Building Songchuan Songchuan Songchuan Songchuan Songchuan Ship Ship Ship Ship Ship Building Building Building Building Building Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Date of January 22, January 22, January 22, January 22, January 22, Keel 2015 2015 2015 2015 2015 Laying Date of May 12, May 30, June 2, 2015 June 19, June 18, Launching 2015 2015 2015 2015 and that MARINA has approved the importation of the above-described vessels in its letters dated August 11, 2015, September 18, 2015, September 21, 2015 and September 29, 2015. cTDaEH In support of its request for exemption, Seen Sam Shipping, Inc. 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; and 4. 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. (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 cargo 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 Minghang 62, M/V Minghang 63, M/V Minghang 54, M/V Minghang 64 and MN Minghang 53 , 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 Seen Sam Shipping, Inc. is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by Seen Sam Shipping, Inc. of M/V Minghang 62, M/V Minghang 63, M/V Minghang 54, M/V Minghang 64 and M/V Minghang 53 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. 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.