PNX-Chelsea Shipping Corporation

October 21, 2019 BIR RULING NO. 666-19 Section 109 (1) (T), NIRC; RR No. 15-2015; BIR RULING NO. 289-16 PNX-Chelsea Shipping Corporation Stella Hizon Reyes Road Bo. Pampanga, Davao City 8000 Attention: AAA _______________ Gentlemen : This refers to your letter dated September 7, 2016, requesting on behalf of PNX-Chelsea Shipping Corporation , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of one (1) unit 2016 built 2,993.00 GRT oil tanker named MK SATURN (TBN: M/T "CHELSEA DOMINANCE") , pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. HTcADC Documents submitted show that PNX-Chelsea Shipping Corporation , with Tax Identification No. 000-000-000-000, is a domestic corporation registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS201128641; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in domestic shipping business per MARINA Certification dated March 14, 2014 valid until March 27, 2017; and that PNX-Chelsea Shipping Corporation is currently importing one (1) unit 2016 built 2,993.00 GRT oil tanker which is particularly described as follows: Name of Vessel MK SATURN IMO Number 9672301 Classification Society/Class ABS Year of Build 2016 Builder/Yard FUJIAN MAWEI SHIPBUILDING LTD. CHINA Grt/Nrt 2993/1159 that MARINA has approved the importation of the above oil tanker in its letter dated July 14, 2016 addressed to PNX-Chelsea Shipping Corporation ; and that per Sworn Statement dated September 5, 2016 executed by AAA, _______________ of PNX-Chelsea Shipping Corporation , the subject vessel is not manufactured domestically in sufficient quantity and at a comparable quality at a reasonable price, and that it is reasonably needed and will be used exclusively by the Corporation for its operations. In support of its request for exemption, PNX-Chelsea Shipping Corporation has submitted the following documents: 1. Certified true copies of the SEC Certificate of Registration, Articles of Incorporation and By-Laws; 2. BIR Certificate of Registration; 3. Certificate of Registration with MARINA; 4. Certified true copy of the MARINA Authority to Import; 5. Shipbuilding Contract; and 6. Sworn Statement dated September 5, 2016. In reply, please be informed that Section 109 (1) (T) of the NIRC of 1997, as amended, provides as follows: " Sec. 109. Exempt Transactions . 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 destined for domestic transport operations shall be exempt from VAT. In relation thereto, Section 4.109-1 (B) (1) (t) of the Revenue Regulations (RR) No. 16-2005, as amended by RR No. 15-2015, which implements the above-quoted provision, provides: aScITE "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 MK SATURN (TBN: M/T "CHELSEA DOMINANCE") 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 PNX-Chelsea Shipping Corporation is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by PNX-Chelsea Shipping Corporation of MK SATURN (TBN: M/T "CHELSEA DOMINANCE") shall be exempt from VAT pursuant to Section 109 (1) (T) of the NIRC 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 subject 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.