VAT at (0%) on the Sale of Deionized Water by a Local Company

June 6, 1988 BIR RULING NO. 244-88 100 (a) 000-00 244-88 Gentlemen : This refers to your letter dated February 12, 1988 stating that you are representing an American company based in Ohio, USA which is a contractor of the U.S. Naval Base, Subic for the supply of deionized water; and that said US contractor gets its supply from a local VAT-registered chemical company. You request a ruling whether the sale of the article by the local company is subject to the value-added tax. In reply, please be informed that among the sales by VAT-registered persons which are zero-rated are those made to persons or entities whose exemptions are effectively zero-rated under special laws or agreements to which the Philippines is a signatory. The exemptions expressly granted are extended not only to the grantee but also to its supplier of goods. Example of zero-rated sales are sales of goods to a U.S. Military facility which is exempt from sales tax under the RP-US Military Bases Agreement. [Sec. 8(b), Revenue Regulations No. 5-87 implement Sec. 100(a)(2), Tax Code, as amended by Executive Order No. 273] In view thereof, the above sale of deionized water by a local company to a U.S. contractor to fulfill the latter's supply contract with a U.S. Military facility is subject to value-added tax at zero percent (0%). aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner