Balyena Tanker Corporation

June 5, 2017 BIR RULING NO. 268-17 Sec. 109 (1) (T), 1997 NIRC; BIR Ruling No. 092-2016 Balyena Tanker Corporation 5/F VIP Bldg., 1140 Roxas Blvd. cor. Nuestra Sra. de Guia St. Brgy. 667 Zone 072, Ermita, Manila Attention: AAA _______________ Gentlemen : This refers to your letter dated September 8, 2016 requesting for a certificate of tax exemption on the vessel importation of one (1) unit newly-built LPG Carrier Vessel named "BTC BALYENA" from Kegoya, Japan pursuant to Sec. 109 (1) (T) of the Tax Code of 1997, as amended. Documents submitted show that the importer, Balyena Tanker Corporation (BTC) is a domestic corporation organized and registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS201603774. It is registered with the Bureau of Internal Revenue (BIR) under Tax Identification No. 000-000-000-000. It is duly registered with the Maritime Industry Authority (MARINA) per Certificate of Accreditation No. DSS-2006-003-065 (2016) valid until August 4, 2019, to engage in domestic shipping business. BTC's vessel to be imported is primarily intended to provide transport/hauling services for Petron in its distribution of LPG products throughout the country and to other prospective clients which purpose is covered by MARINA's authority to acquire subject vessel thru importation dated August 11, 2016 pursuant to the MARINA endorsement dated September 2, 2016, favorably endorsing the vessel importation as compliant with its regulation. Below is the specification of the subject vessel: Vessel Name : BTC Balyena Nationality : Philippines Flag : To be registered in the Philippines Shipbuilder : KEGOYA DOCK CO., LTD. Date of Keel Laying : December 13, 2015 Year Built : 2016 IMO No. : 9766619 Hull No. : 1171 Gross Tonnage : 3,404 Tons Kind of Ship : LPG Carrier the detailed dimension of the aforesaid vessel, viz. : Length : 89.96 m Breadth : 15.50 m Depth : 7.20 m B.H.P. : 2,200 kw Estimated Speed : 13.5 kwts. No. of shaft : One (1) Engine Make/Type : One (1) Diesel Engine AKASAKA GUEC 33 LS II In reply, please be informed that Section 109 (1) (T) of the 1997 Tax Code, 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 intended to provide transport/hauling services for Petron in its distribution of LPG products throughout the Philippines shall be exempt from VAT. CAIHTE 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." It is noted that BTC BALYENA is a brand new vessel and has been issued by MARINA with the required authority to be imported. Hence, the importation of the said vessel by BTC is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation of BTC BALYENA shall be exempt from VAT pursuant to Section 109 (1) (T) of the Tax Code 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-described vessel. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Renumbered by Republic Act No. 10378.