BIR Ruling No. 213-11

July 5, 2011 BIR RULING NO. 213-11 Sec. 109, Tax Code of 1997; RMC 48-2002; VAT Ruling No. 064-90; VAT Ruling No. 037-93; VAT Ruling No. 029-99 North Cotabato Palm Oil Corporation Sitio San Nicolas, Bgy. San Vicente, Makilala, North Cotabato Attention: Mr. Rafael F. Natividad Treasurer/Director Gentlemen : This refers to your letter dated November 24, 2010 requesting for a ruling on the Value-Added Tax (VAT) treatment of the importation of oil palm seeds/nuts, sale of oil palm seedlings and the requirement for the issuance of Authority to Release Imported Goods (ATRIG) in relation thereto. Documents submitted disclosed that NORTH COTABATO PALM OIL CORPORATION with Taxpayer Identification No. 288-417-291-000, is a domestic corporation located in Makilala, North Cotabato; that it is registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. CN200932680 dated December 21, 2009; that the primary purpose of the corporation is to engage in the development and management of oil palm nurseries, oil palm plantations, palm oil mill, research and development for oil palm breeding; that it is registered with accredited by the Philippine Coconut Authority on November 30, 2010 as having satisfactorily complied with the requirements and conditions in the Certificate of Nursery Inspection; that initially, the corporation will be establishing an oil palm nursery for the production of oil palm seedlings from imported germinated oil palm seeds which will be imported from DAMI Papua New Guinea; that the oil palm seedlings will be grown in its nursery for twelve (12) months before being released to the farmers of the North Cotabato province; that the corporation obtained a Certification from the Bureau of Plant and Industry, Manila dated November 18, 2010, stating that "oil palm seeds and palm nuts are synonymous and can be used interchangeably since their meaning is the same" ; and that an opinion is requested on the following: 1. Whether or not the importation of oil palm seeds/nuts is exempt from VAT; ISTCHE 2. Whether or not the sale of oil palm seedlings is exempted from the imposition of VAT; and 3. Whether or not the prescribed Authority to Release Imported Goods (ATRIG) shall no longer be required to be issued by the Bureau of Internal Revenue (BIR) prior to the release of oil palm seed/nuts from the Bureau of Customs (BOC) In reply, please be informed that Section 109 (1) (B) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337, sale or importation of fish, prawn, livestock and poultry feeds is exempt from VAT, viz. : "Sec. 109. Exempt Transactions. (1) Subject to the provisions of Subsection 2 hereof, the following transactions shall be exempt from the value-added tax: (A) . . . (B) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets) xxx xxx xxx" (Emphasis supplied) Hence, the sale or importation of oil palm seeds/nuts and oil palm seedlings is exempt from the imposition of twelve percent (12%) VAT. (VAT Ruling No. 064-90 dated March 9, 1990; VAT Ruling No. 037-93 dated July 5, 1993; VAT Ruling No. 029-99 dated March 18, 1999) Revenue Memorandum Circular (RMC) No. 48-02 dated November 6, 2002 circularized BIR-BOC Joint Memorandum Circular No. 1-2002 dated September 16, 2002 which provides for a list of imported articles that are clearly exempt from the imposition of value-added tax under Section 109 of the Tax Code of 1997 and as such, the prescribed ATRIG shall no longer be issued by the BIR prior to the release of these articles from the BOC subject to submission of required documents stated therein. Considering that "Palm nuts" is listed in the said Joint Memorandum Circular under classification "F. Unprocessed Seeds, Miscellaneous Grains, Medicinal Herbs and Plants", the importation of oil palm nuts shall no longer require the issuance of ATRIG pursuant to the above-stated Circular. However, the imported articles shall only be released by the BOC if the same are accompanied by the relevant documents, i.e. , (a) Phytosanitary Certificate from the Country of Origin; and (b) Permit to Import as well as Clearance from the Bureau of Plant Industry. In view of the foregoing, this Office hereby rules as follows: 1. The importation of oil palm seeds/nuts is exempt from the 12% VAT pursuant to Section 109 (1) (B) of the Tax Code of 1997, as amended by R.A. 9337; ECcTaS 2. The subsequent sale of oil palm seedlings grown by NORTH COTABATO PALM OIL CORPORATION is exempted from the imposition of 12% VAT pursuant to Section 109 (1) (B) of the Tax Code of 1997, as amended by R.A. 9337; 3. ATRIG shall no longer be required to be issued by the BIR prior to the release of oil palm seed/nuts from the BOC. The release of imported articles by the BOC is however subject to the submission of the relevant documents required under the BIR-BOC Joint Memorandum Circular No. 1-2002 (RMC 48-02). 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 null and void. LexLib Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue