Montenegro Shipping Lines, Inc.

November 13, 2019 BIR RULING NO. 679-19 Section 109 (1) (T), NIRC; RR No. 15-2015; BIR RULING NO. 0260-19 Montenegro Shipping Lines, Inc. Montenegro Corporate Center, along Diversion Road, Bolbok, Batangas City, 4200 Attention: AAA _______________ Gentlemen : This refers to your letter dated June 6, 2019, requesting on behalf of Montenegro Shipping Lines, Inc. , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of one (1) Unit 2010-launched, 421.00 GT LCT Type Cargo Ship named MV "SAMBO 2" (TBR: MV REINA WILHELMINA), pursuant to Section 109 (1) (T) of the National Internal Revenue Code (NIRC) of 1997, as amended. Documents submitted show that Montenegro Shipping Lines, Inc. ,with Tax Identification No. 000-000-000-000, is a domestic corporation registered with the Securities and Exchange Commission (SEC) under Company Registration No. 70040; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in domestic shipping business per MARINA Certification dated July 7, 2017 valid until July 21, 2020; and that Montenegro Shipping Lines, Inc. is currently importing one (1) Unit 2010-launched, 421.00 GT LCT Type Cargo Ship which is particularly described as follows: Vessel's Name MY "SAMBO 2" (TBR: MV REINA WILHELMINA) Ship Builder Sam Kwang Shipbuilding and Engineering Co.,Ltd. Where Built Republic of Korea Year Built 2010 Length 54.67m Breadth 15.00m Depth 02.50m Gross Tonnage 421 Tons Dimensions 66.0m x 54.67m x 2.50m Main Engine DAEWOO 750HP x 2 sets x 1800RPM that MARINA has approved the importation of the above cargo ship in its letter dated March 7, 2019 addressed to Montenegro Shipping Lines, Inc. ;and that per Sworn Statement dated June 6, 2019 executed by BBB, __________ of Montenegro Shipping Lines, Inc. ,the subject cargo vessel cannot be manufactured domestically in comparable quality, technology and at reasonable price; and that it is reasonably needed and will be used exclusively by the company operations. In support of its request for exemption, Montenegro Shipping Lines, Inc. 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. Certified true copy of the Certificate of Registration with MARINA; 4. Certified true copy of the MARINA Authority to Import; 5. Sales and Purchase Agreement dated March 1, 2019, executed by and between Shimizu & Co. Ltd. and Montenegro Shipping Lines, Inc.; 6. Sworn Statement dated June 6, 2019. In reply, please be informed that Section 109 (1) (T) of the NIRC of 1997, as amended, provides as follows: " Sec. 109. 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: "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 "MV Reina Wilhelmina" is a 2010-launched, 421.00 GT LCT Type Cargo Ship and has been issued by MARINA with the required authority to be imported. Hence, the importation of the said vessel by Montenegro Shipping Lines, Inc. is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by Montenegro Shipping Lines, Inc. of "MV Reina Wilhelmina" 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. (BIR Ruling No. 0260-19 dated May 7, 2019) 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.