BIR Ruling No. 371-13

October 10, 2013 BIR RULING NO. 371-13 Section 109 (1) (B), Tax Code of 1997 Queensland Achievers Trading No. 1 Bagbaguin, Meycauyan City Bulacan Attention: Fredes L. Rivera Proprietress Gentlemen : This refers to your letter dated 25 March 2013, requesting on behalf of Queensland Achievers Trading certificate of exemption from value-added tax (VAT) on its sale of feed ingredients pursuant to Section 109 (1) (B) of the 1997 Tax Code, as amended. It is represented that Queensland Achievers Trading , is a sole proprietorship duly registered under the name of Fredes Lopez Rivera, with Taxpayer's Identification Number (TIN) 182-040-177-000; that it is duly registered with the Department of Trade and Industry (DTI) under DTI Certificate of Registration No. 01764490 valid from 15 June 2012 until 15 June 2017; and that it is engaged in the business of purchasing from food companies scrap or unusable goods which are no longer fit for human consumption and selling them as feed ingredients to manufacturers of poultry and livestock feeds, or as feeds to animal farms. EcDSHT In support of its application for tax exemption, Queensland Achievers Trading submitted the following documents: 1. Certified True Copy of the DTI Registration; 2. Certified True Copy of the current Certificate of Registration as Feed Establishment with the Bureau of Animal Industry; 3. Original Certification from the Bureau of Animal Industry that the products being sold as feed ingredients are unfit for human consumption; 4. Certified True Copy of the Annual Income Tax Return for Taxable Year 2012; 5. Certified True Copy of the Comparative Financial Statements for Taxable Years 2011 and 2012; and 6. Certified True Copies of the Certificates of Feed Product Registration. In reply, please be informed that Section 109 (1) (B) of the Tax Code of 1997, as amended by Republic Act No. 9337, provides for the exemption from VAT of the sale or importation of livestock and poultry feeds, including ingredients, used in the manufacture of finished feeds. The aforesaid provision reads, 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: xxx xxx xxx 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 Based on the above-cited provision, the sale of feeds, including feed ingredients, is considered exempt from VAT. It is significant to note that since the manufacture, importation, sale or distribution of feeds or feedstuff require prior registration and permit from the Bureau of Animal Industry under Republic Act No. 1556, as amended by Presidential Decree No. 7, the certification in the nature and composition of the commodities/items as stated in the registration and import permit issued by Bureau of Animal Industry will govern the classification of the said items for purposes of VAT under Section 109 (1) (B) of the Tax Code of 1997, as amended. It is noted that the Bureau of Animal Industry has issued three (3) Certificates of Feed Product Registration in favor of Queensland Achievers Trading for the following feed products: CTDAaE Feed Product Date Issued Name of Product Classification Registration No. FIL-264 May 21, 2013 Scrap Milk Powder Mixed Feed Ingredient with US Soya Meal FIL-265 May 21, 2013 Scrap Coffee Creamer Feed Ingredient Mixed with US Soya Meal FIL-264 May 21, 2013 Scrap Chocolate Powder Feed Ingredient Mixed with US Soya Meal Moreover, a Certification dated October 1, 2013 was issued by the Bureau of Animal Industry certifying that the above-named products are no longer fit for human consumption. In view of the foregoing, since the Bureau of Animal Industry has already certified that the above-named scrap products are indeed ingredients in the manufacture of feeds, the sale thereof by Queensland Achievers Trading is exempt from the twelve percent (12%) VAT imposed under Section 106 (A) of the 1997 Tax Code, as amended, on the sale of goods. 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