VAT Exemption on TFFC

September 16, 1988 BIR RULING NO. 454-88 103 (a) 120-88 454-88 Gentlemen : This refers to your letter dated July 21, 1988 stating that your client, The Flower Farm Corporation (TFFC), a corporation organized and existing under the laws of the Philippines, is engaged in the business of growing and selling flowers of different varieties; that the flowers are grown by TFFC in structural greenhouses located in a five-hectare property in Tagaytay City; that TFFC itself grows or produces all the flowers that it sells; that TFFC sells its cut flowers directly to flower shops and various outlets which in turn sell the same to others including end users; that TFFC also sells cut flowers to end users for use in special occasions such as weddings and office blessings; that in case of office blessings, your client arranges the cut flowers in a vase, basket or other suitable receptacle and adds such materials as chicken wire, ferns, leaves, ribbon and wood; that in case of sales to the flower shops and various outlets and to end users, TFFC does not make any alteration in the exterior texture or form or inner substance of the flowers other than cutting them into desired lengths; that the cut flowers do not undergo any physical or chemical processes of preparation or preservation for the market, other than cutting them and in the case of sale to end users, arranging them in such materials as a vase, chicken wire, ferns, leaves, ribbon and wood. Based on the foregoing, you now request confirmation of your opinion that the sale by your client of cutflowers that it grows and produces to flower shops and various outlets as well as to end users for special occasions is exempt from the value-added tax. aisadc In reply, please be informed that this Office hereby confirms your opinion. Being the primary producer of non-food agricultural products in their original state, TFFC is exempt from the value-added tax pursuant to Section 103(a) of the Tax Code, as amended by Executive Order No. 273. Your client may, however, opt to register for VAT purposes in which case it is allowed to use as input tax credit the VAT imposed on its purchases of materials and other implements used in connection with its business of growing and selling flowers. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner