CAGLI Shipping Lines

January 17, 2020 BIR RULING NO. VAT-003-2020 Sec. 109 (1) (T), 1997 NIRC; BIR Ruling No. 092-2016 CAGLI Shipping Lines Gothong Private Wharf, Pier 7 F.F. Cruz Reclamation Area Mandaue City Attention: Mr. Calvin Boniface Gothong President Gentlemen : This refers to your letter dated December 20, 2016 requesting for a certificate of tax exemption on the vessel importation of one (1) unit 5,930.00 GT, 1995 built RoRo Cargo/Vehicle Ship named MV Prince Hayate (to be renamed MV Panglao Bay 1) pursuant to Sec. 109 (1) (T) of the Tax Code of 1997, as amended. Documents submitted show that the importer, Carlos A. Gothong Lines, Inc. (CAGLI) is a domestic corporation organized and registered with the Securities and Exchange Commission (SEC) under Company Registration No. _____. It is registered with the Bureau of Internal Revenue (BIR) under Tax Identification No. ____________ with office address at Gothong Bldg.,Port Service Rd.,North Reclamation Area, Brgy. Tejero, Cebu City. It is duly registered with the Maritime Industry Authority (MARINA) per Certificate of Accreditation No. _____________ CEB valid until October 30, 2019, to engage in domestic shipping business. CAGLI's vessel to be imported is primarily intended to provide transport services throughout the country which purpose is covered by MARINA's authority to acquire subject vessel thru importation dated December 9, 2016. Below is the specification of the subject vessel: Vessel Name : MV Panglao Bay 1 Year Built : 1995 Previous Name : MV Princess Hayate Type : RORO Cargo vehicle Hull : Steel Gross Tonnage : 5930 Breadth 22.40 m. Depth 11.75 Net : 1850 No. of Engines 1 Speed 19.00 Knots Make of Engine : Hitachi, Osaka B&W/7S50MC Type of Engine : Diesel Total Power : 9988 Port of Registry : Ulaanbaatar Date of expiry : 01 May 2017 In reply, please be informed that Section 109 (1) (T) of the 1997 Tax Code, 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 marine vessel intended to provide transport operations throughout the Philippines shall be exempt from VAT. In relation thereto, Section 4.109-1 (B) (1) (t) of 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 Panglao Bay 1 has been issued by MARINA with the required authority to be imported. Hence, the importation of the said vessel by CAGLI is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation of MV Panglao Bay 1 shall be exempt from VAT pursuant to Section 109 (1) (T) of the Tax Code 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 above-described vessel dated December 9, 2016. 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.