Pulau Banda Corporation

April 24, 2017 BIR RULING NO. 212-17 Section 109 (1) (T) of the Tax Code of 1997, as amended; Revenue Regulations No. 15-2015; BIR Ruling No. 147-2016; and BIR Ruling No. 92-2016 Pulau Banda Corporation 5th Floor, Pacific Star Building, Sen. Gil Puyat corner Makati Avenue, Makati City Attention: AAA _______________ Gentlemen : This refers to your letters dated June 28, 2016 and July 11, 2016, respectively, requesting for a ruling that the importation of two (2) units, 2007-built, 492.00 GT deck cargo ships, "M/V PERMAI JAYA" and 2009-built, 499.00 GT "WAWASAN 5" , and one (1) unit 1999-built, 134.00 GT general purpose ship, "M/V PSALM 23" (TBR: "TUBATAHA UNO") , is exempt from the payment of Value-Added Tax (VAT), pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. HTcADC Documents submitted show that PULAU BANDA CORPORATION is a domestic corporation duly registered with the Securities and Exchange Commission (SEC), with Company Registration No. CS201508969 dated May 8, 2015; that its primary purpose is to own, charter, maintain, manage, or operate ships, vessels, boats, or watercrafts for hauling, transport, or conveyance of merchandise, freight goods, or any kind of cargo, including passengers, to, from, and between the various islands of the Philippines and neighboring countries in pursuit of trade and commerce, and when needed, to assist in emergency rescue, disaster reliefs, and humanitarian aid operations; and, as incidental thereto, to own, rent, maintain, or operate piers, harbors, wharfs, jetties, or docks, as well as maintenance, repair, and service facilities for such watercrafts; that it is also registered with the Bureau of Internal Revenue (BIR) with Certificate of Registration No. OCN9RC0000272797 dated November 10, 2015 and with Taxpayers Identification No. (TIN) 000-000-000-000; that it is currently importing three (3) vessels, namely, "M/V PERMAI JAYA," "WAWASAN 5" and "M/V PSALM 23" (TBR: "TUBATAHA UNO") , particularly described as follows: SPECIFICATION VESSEL 1 VESSEL 2 VESSEL 3 Vessel Name "M/V PERMAI JAYA" TBR: TUBATAHA UNO (formerly "M/V PSALM 23") "WAWASAN 5" Vessel Type Deck Cargo Ship Steel General Purpose Deck Cargo Ship Flag Malaysia Malaysia Malaysia Port of Registry Kuching Kuching Kuching Official Number 330856 329685 333260 IMO Number 9463188 8807868 9614373 Overall Length 42.64 m 28.04 m 47.00 m Regular Breadth 11.60 m 6.00 m 11.00 m Regular Depth 3.05 m 2.88 m 3.20 m Gross Tonnage 492 134 499 Net Tonnage 148 41 149 Main Engines 2x620 BHP, Yanmar 6LAH-STE 2x Cummins Diesel KTA 19-M4, Each 550 BHP 2x829 BHP Yanmar 6AYM-ETE Steering System Hydraulic Steering Hydraulic Steering Hydraulic Steering Main Gen-Set 2x80kw, Cummins 6BT 5.9 G1 2x80kw, Cummins 6CTa8-3G2 2x80kw, Cummins 6BT5.9-M Harbor Generator none none 1x80kw, Cummins 6BT5.9-M Hull Material Steel Steel Steel Place of Building/Shipyard Sibu, Sarawak, Malaysia Sibu, Sarawak, Malaysia Sibu, Sarawak, Malaysia Classification Ship Classification Malaysia (SCM) Ship Classification Malaysia (SCM) Bureau Veritas (BV) Keel-Laid Date 22 January, 2007 January, 1999 15 December, 2009 Launch Date 15 January, 2007 10 February, 2003 21 December, 2010 Delivery Date 30 June, 2007 27 October, 2003 22 January, 2011 and that PULAU BANDA CORPORATION has obtained from Maritime Industry Authority (MARINA) the necessary clearance/authority to import the abovementioned vessels. aScITE In support of its request for exemption, PULAU BANDA CORPORATION has submitted the following documents: 1. Request Letters dated June 28, 2016 and July 11, 2016, respectively; 2. Certified true copies of its SEC Certificate of Incorporation, Articles of Incorporation and By-Laws; 3. Certified true copy of its BIR Certificate of Registration; 4. Certified true copy of its MARINA Certificate of Accreditation dated April 25, 2016 and July 1, 2016; 5. Certified true copies of the Authority to Acquire/Import issued by MARINA dated 25 April, 2015 and 1 July, 2016; 6. Certified true copies of its Annual Income Tax Return and Audited Financial Statements for the year 2015; 7. Affidavits of Undertaking; 8. Copies of the Builder's Certificates; and 9. 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." HEITAD It is noted that "M/V PERMAI JAYA," "M/V PSALM 23" (TBR: "TUBATAHA UNO") and "WAWASAN 5" were acquired by virtue of Authority to Acquire/Import issued by MARINA dated April 25, 2016 and July 1, 2016, respectively. Hence, the importation of said vessels by PULAU BANDA CORPORATION is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by PULAU BANDA CORPORATION of "M/V PERMAI JAYA," "WAWASAN 5," and "M/V PSALM 23" (TBR: "TUBATAHA UNO") 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-mentioned vessels as described in the Authority to Acquire/Import dated April 25, 2016 and July 1, 2016, respectively. (BIR Ruling Nos. 92-2016 and 147-2016) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Renumbered by Republic Act No. 10378.