Procedure in Applying for the Refund or Tax Credit of the Input VAT Being Charged by Suppliers

December 11, 1998 BIR RULING NO. 174-98 109 (d)-174-98 Frabelle Fishing Corporation 1051 North Bay Boulevard Navotas, Metro Manila Attention: Mr . Francisco Tiu-Laurel Gentlemen : This refers to your letter dated November 8, 1997 stating that "We are engaged in the capture and sale of fish in their original state which is exempted from VAT. Our sales constitute domestic sales and our buyers are canners who use our products as their raw materials for canning usually intended for export. In addition, we also have direct export sales where our fish in frozen form are shipped to foreign countries. In the course of our fishing (capturing) operations, we have many purchases (supplies, parts, fuel, etc.) wherein our suppliers charge us VAT thereby, giving us considerable amount of input VAT." Based on the foregoing, you are requesting information on how you can apply for the refund or tax credit of the input VAT being charged by your suppliers. In reply, please be informed that your exemption from VAT on your sale of fish under Section 109(d) of the Tax Code of 1997 covers only your direct tax liability, meaning your output VAT on the gross receipts from your sale of fish in their original state. However, you cannot claim exemption from the input VAT being passed on to you by the suppliers on your purchase of supplies, parts, fuels, etc., as forming part of the invoice price because VAT, being an indirect tax, may be shifted or passed on to the buyer of goods and services pursuant to Sec. 105 of the Tax Code of 1997. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue