BIR Ruling No. 283-15

August 25, 2015 BIR RULING NO. 283-15 R.A. 8424, Sec. 109 (1) (A); RR 16-2005; BIR Ruling No. 348-11 Fisher Farms Incorporated Dampol 2nd A, Pulilan, Bulacan, Philippines 3005 Attention: Ms. Katherine C. Buenaventura Technical Director Gentlemen : This refers to your letters dated June 29, 2012 and December 3, 2014, and indorsed to this office by the Regional Director of Revenue Region No. 5-Caloocan, relative to your request for exemption from the payment of value-added tax (VAT) on your production and sale of marine food products. It is represented that FISHER FARMS, INC. (TIN 213-148-251-000), a VAT-registered corporation, is engaged in the production and sale of the following marine food products: FFI Bangus Unseasoned Deboned FFI Bangus Smoked FFI Bangus Belly FFI Bangus Pure Belly FFI Bangus Baby Whole FFI Bangus Back Fillet (Strips) FFI Bangus Trimmings FFI Tilapia Whole FFI Cream Dory (Basa) Fillet FFI Cream Dory (Basa) Head FFI Cream Dory (Basa) Skin FFI Cream Dory (Basa) Trimmings FFI Cream Dory (Basa) Steak FFI Pompano Whole Fresh Frozen Deboned/Split Baby Milkfish In detail, the procedures undergone by the above mentioned products are as follows: HESIcT FFI Bangus Unseasoned Deboned Milkfish are sorted to sizes and are Fresh Frozen Deboned/Split Baby split into butterfly cut. All internal Milkfish organs are removed from the fish, after which the fish is deboned. The deboned fish is washed and packed. FFI Bangus Smoked Milkfish are sorted to sizes and are split into butterfly cut. All internal organs are removed from the fish, after which the fish is deboned. It is then pre-cooked in a brine solution and smoked in an automatic smokehouse using beechwood chips. After smoking, marinating, it is then packed and frozen. FFI Bangus Pure Belly Milkfish are sorted to sizes and are FFI Bangus Belly split into butterfly cut. All internal organs are removed from the fish, after which the fish is deboned. Head and tail portions are cut off. Belly is washed and packed. FFI Bangus Back Fillet (Strips) Milkfish are sorted to sizes and are split into butterfly cut. All internal organs are removed from the fish, after which the fish is deboned. Head and tail portions are sliced off. Belly is removed and the remaining meat is sliced into strips and washed. FFI Bangus Trimmings Milkfish are sorted to sizes and are split into butterfly cut. All internal organs are removed from the fish, after which the fish is deboned. Head and tail portions are cut off. Trimmings that are left are collected, washed and packed. FFI Cream Dory (Basa) Fillet Cream Dory are sorted to sizes and FFI Cream Dory (Basa) Head are gutted. All internal organs are removed from the fish, after which the fish is washed. Flesh is then removed using a sharp filleting knife. It is then trimmed, washed and packed. FFI Cream Dory (Basa) Skin Cream Dory are sorted to sizes and FFI Cream Dory (Basa) Trimmings are gutted. All internal organs are FFI Cream Dory (Basa) Steak removed from the fish, after which the fish is deboned. Head, skin and trimmings are cut off. They are then collected, washed and packed. FFI Pompano Whole Fish are sorted to size, washed, FFI Tilapia Whole frozen and packed. FFI Bangus Baby Whole Based on the foregoing representations, you now request for confirmation of your opinion that the sale of the above enumerated milkfish (bangus), tilapia, cream dory and pompano products are exempt from the 12% value-added tax (VAT) pursuant to Section 109 of the Tax Code of 1997. In reply thereto, please be informed that the "sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore" is exempt from VAT. (Section 109 (1) (A) Tax Code of 1997) The term "original state" is amplified to mean as follows: "Meat, fruits, fish, vegetable and other agricultural and marine food products shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking, or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar packaging method." (Section 4.109-1(B)(1)(a) RR 16-2005) However, it has been held time and again that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favour of the taxing power, and he would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted ( Sea-Land Service, Inc. vs. Court of Appeals, et al. , G.R. No. 122605, 30 April 2001). Otherwise stated, any exemption from the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied therefrom. ( Davao Gulf Lumber Corp. vs. Commissioner of Internal Revenue, et al. , G.R. No. 117359, 23 July 1998) (BIR Ruling No. 348-11 dated September 28, 2011) Foregoing considered, the following products of FISHER FARMS, INC.: FFI Bangus Unseasoned Deboned FFI Bangus Smoked FFI Bangus Belly FFI Bangus Pure Belly FFI Bangus Baby Whole FFI Bangus Back Fillet (Strips) FFI Bangus Trimmings FFI Tilapia Whole FFI Cream Dory (Basa) Fillet FFI Cream Dory (Basa) Head FFI Cream Dory (Basa) Skin FFI Cream Dory (Basa) Trimmings FFI Cream Dory (Basa) Steak FFI Pompano Whole Fresh Frozen Deboned/Split Baby Milkfish which have undergone the simple processes of preparation of chopping, deboning, smoking and stripping, are EXEMPT from the 12% VAT. caITAC 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue