BIR Ruling No. 595-12

October 19, 2012 BIR RULING NO. 595-12 Secs. 109 (1) (T) of the NIRC of 1997; RMC 46-08 KLM Royal Dutch Airlines 39/F Yuchengco Tower RCBC Plaza Cor. Sen. Gil Puyat & Ayala Avenue, Makati City Attention: Ms. Miralyn P. Sarino Finance Manager Gentlemen : This refers to your letter dated 23 February 2012 requesting legal opinion on whether or not the importation of office/operational supplies ordered by KLM Royal Dutch Airlines from its Head Office for its exclusive use in its operation is exempt from Value-Added Tax (VAT) pursuant to Revenue Memorandum Circular No. 46-2008. cEHSIC Documents submitted disclose that KLM Royal Dutch Airlines (KLM) , with TIN 000-469-186-000, is a foreign corporation registered with the Securities and Exchange Commission (SEC) doing business in the Philippines to engage in the world-wide air transportation of passengers and freight; that a list of office/operational supplies covered by airway bills are ordered from its Head Office in the Netherlands to be used exclusively by KLM in its operations in the Philippines: Ref. AWB No. Date of Contents Date of Value VAT Arrival Exemption Computation from Dept. of Customs of Finance for duties 1 074-02907542 29-Dec-11 Shipper 2-Feb-12 EUR25.03 P1,492.00 Certification for light animal adhesive equation KLM cargo 2 074-02909200 7-Jan-12 Cabin baggage 1-Feb-12 EUR2.12 P590.00 label yellow 3 074-02911974 19-Jan-12 Cabin baggage 1-Feb-12 EUR50.88 P4,582.00 label Yellow 4 074-02912630 21-Jan-12 ULD control 10-Feb-12 EUR30.32 P1,536.00 receipt 5 074-02917994 11-Feb-12 Baggage 1-Mar-12 EUR67.8 P2,657.00 container 6 074-02922404 1-Mar-12 Transportation 26-Mar-12 EUR10.45 No Credit Voucher, computation Ticket Excess yet. Baggage EBT2 that the foregoing KLM documents/shipments are pending release at the airport and that the Department of Finance has issued on January 27, 2012 a Certification exempting the shipments from duties; and that Bureau of Customs require the presentation of a BIR certification confirming that said shipments are VAT exempt. In reply, please be informed that Section 109 (1) (T) of the Tax Code of 1997, as amended, provides that: "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 (T) Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations." In relation to this is Revenue Memorandum Circular No. 046-08 1 which clarified as follows: "Q-10: Are importations of fuel, goods and supplies by persons engaged in international air transport operation exempt from VAT? A-10: The importation of fuel, goods and supplies for use in the international air transport operations is VAT exempt. Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port without stopping at any other port in the Philippines to unload passengers and/or cargoes loaded in and from another domestic port; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to 12% VAT." ATaDHC Supporting documents show that the goods ordered by KLM from its Head Office are office and operational supplies which include airline and operator's documents 2 as defined under the Convention on International Civil Aviation, International Civil Aviation Organization Amendments (ICAO) and which materials are to be used exclusively by KLM in its international air transport operations. In view of the foregoing, this Office is of the opinion that the importation by KLM of office/operational supplies covered by Airway Bill Nos. 074-02907542; 074-02909200; 074-02911974; 074-02912630; 074-02917994; and 074-02922404, which are to be exclusively used by it in its international air transport operations are exempt from the VAT pursuant to Section 109 (1 ) (T) of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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 Footnotes 1. Issued February 1, 2008. Clarification of Issues Concerning Common Carriers by Air and Their Agents Relative to the Revenue and Receipt from Transport of Passengers, Goods/Cargoes and Mail, and from Excess Baggage. 2. Airline and operator's documents defined as "Airway bills/consignment notes, passenger tickets and boarding passes, bank and agent settlement plan documents, excess baggage tickets, miscellaneous charge orders (M.C.O.), damage and irregularity reports, baggage and cargo labels, timetables and weight and balance documents, of use by airlines and operators."