Tax Status of BOI-registered Garment Exporters in Light of EO No. 1045

November 21, 1986 BIR RULING NO. 258-86 170 000-00 258-86 Gentlemen : This refers to your letter dated September 19, 1986 requesting, in effect, a ruling as to the tax status of garment exporters registered with the Board of Investments (BOI), like that company, in view of the passage of Executive Order No. 1045. It is represented that Saldana & Company, Inc. is engaged in the manufacture of various types of garments for export principally to the United States; that since March 13, 1979, that company has been registered with the BOI pursuant to the provisions of Republic Act No. 6135 as an export producer on a non-pioneer status with Certificate of Registration No. 79-876; that Saldana & Company, Inc. acquires the raw materials from its U.S. customers on consignment basis after which it manufactures the same into garments and then exports to its U.S. customers; and that the foreign customers have a choice of designs from among the patterns and styles on hand with that company although the latter is not prohibited from using the same pattern, style or design for its other customers. In reply, please be informed that Executive Order No. 1045 (effective August 7, 1985), pertinent portion of which reads: "Sec. 6. Enterprises registered with the Board of Investments as domestic or export producers under Book I of the Omnibus Investments Code are recognized as manufacturers and therefore not subject to contractors tax for their registered operations". merely clarified and confirmed a long standing position of the BOI that domestic or export producers registered with the BOI as such are considered manufacturers and not contractors. Accordingly, as a BOI-registered export producer engaged in the manufacture of garments directly exporting its export products, that company although registered under Republic Act No. 6135 and not under Republic Act No. 5186 is considered as a manufacturer and not as a contractor, hence, it is not liable to the contractor's tax imposed under Section 170 (formerly Section 205) of the Tax Code, as amended. However, inasmuch as Executive Order No. 1045 does not provide for a retroactive application, your status as a manufacturer is considered only from the date of the approval of said Executive Order No. 1045 on August 7, 1985 and not from the date of your registration with the BOI on March 13, 1979. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue