Healthy Top Harvest Distribution, Inc.

December 22, 2020 BIR RULING NO. VAT-0673-2020 Sec. 109 (1) (A) of the Tax Code of 1997; BIR Ruling No. 107-19 Healthy Top Harvest Distribution, Inc. 2/F Parian, Comm'l Complex, Commonwealth Ave., Matandang Balara 3, Quezon City Attention: Bryan Du Baladad President Gentlemen : This refers to your letter dated September 23, 2019, with attachments, requesting on behalf of HEALTHY TOP HARVEST DISTRIBUTION, INC. for value-added tax (VAT) exemption on its importation and distribution of frozen fruit and vegetable, pursuant to Section 109 (1) (A) of the National Internal Revenue Code of 1997 (Tax Code), as amended. Documents submitted show that HEALTHY TOP HARVEST DISTRIBUTION, INC. , with Taxpayer's Identification Number (TIN) __________ is a corporation organized and existing under the Philippine laws; that it is duly registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. __________ and that as shown in its Articles of Incorporation, its primary purpose is to engage in, conduct and carry on the business of buying, selling, distributing, marketing in wholesale insofar as may be permitted by law, all kinds of agriculture products . Records also show that HEALTHY TOP HARVEST DISTRIBUTION, INC. is a registered Importer of the below list of fruits with Bureau of Plant Industry with Registration No. __________ valid until October 24, 2022. Product Type Origin Blackberries Individual Quick Frozen Fruit Various Countries Blueberries Individual Quick Frozen Fruit Various Countries Cranberries Individual Quick Frozen Fruit Various Countries Raspberries Individual Quick Frozen Fruit Various Countries Raspberries Crumble Individual Quick Frozen Fruit Various Countries Strawberries Individual Quick Frozen Fruit Various Countries 4-Berry Mix Individual Quick Frozen Fruit Various Countries Fruit Mix 1 (Strawberry, Raspberry, Mango, Banana) Individual Quick Frozen Fruit Various Countries Fruit Mix 2 (Blackberry Blueberry, Banana) Individual Quick Frozen Fruit Various Countries Fruit Mix 3 (Strawberry, Blueberry, Banana) Individual Quick Frozen Fruit Various Countries Lychee Individual Quick Frozen Fruit Various Countries Apricot Halves Individual Quick Frozen Fruit Various Countries Jackfruit Individual Quick Frozen Fruit Various Countries Black Currants Individual Quick Frozen Fruit Various Countries Boysenberries Individual Quick Frozen Fruit Various Countries Dark Cherries (Sweet) Individual Quick Frozen Fruit Various Countries Red Cherries (Sour) Individual Quick Frozen Fruit Various Countries 7-Berry Mix Individual Quick Frozen Fruit Various Countries Plum Halves Individual Quick Frozen Fruit Various Countries Red Currants Individual Quick Frozen Fruit Various Countries Rhubarb Individual Quick Frozen Fruit Various Countries Avocado Individual Quick Frozen Fruit Various Countries Banana Individual Quick Frozen Fruit Various Countries Mango Individual Quick Frozen Fruit Various Countries Acai Puree Individual Quick Frozen Fruit Puree Various Countries Avocado Puree Individual Quick Frozen Fruit Puree Various Countries Banana Puree Individual Quick Frozen Fruit Puree Various Countries Mango Puree Individual Quick Frozen Fruit Puree Various Countries Strawberry Puree Individual Quick Frozen Fruit Puree Various Countries Kiwi Puree Individual Quick Frozen Fruit Puree Various Countries Raspberry Puree Individual Quick Frozen Fruit Puree Various Countries Avocado Pulp Individual Quick Frozen Fruit Pulp Various Countries Passionfruit Pulp w/ seeds Individual Quick Frozen Fruit Pulp Various Countries Passionfruit Pulp w/o seeds Individual Quick Frozen Fruit Pulp Various Countries Organic Blackberries Individual Quick Frozen Organic Fruit Various Countries Organic Blueberries Individual Quick Frozen Organic Fruit Various Countries Organic Cranberries Individual Quick Frozen Organic Fruit Various Countries Organic Raspberries Individual Quick Frozen Organic Fruit Various Countries Organic Strawberries Individual Quick Frozen Organic Fruit Various Countries Organic Berry Mix Individual Quick Frozen Organic Fruit Various Countries Mango Chunks Individual Quick Frozen Organic Fruit Various Countries Green Beans Individual Quick Frozen Vegetable Various Countries Baby Carrot Individual Quick Frozen Vegetable Various Countries Carrot Diced Individual Quick Frozen Vegetable Various Countries Corn Supersweet Individual Quick Frozen Vegetable Various Countries Corn Individual Quick Frozen Vegetable Various Countries Kale Individual Quick Frozen Vegetable Various Countries Green Peas Individual Quick Frozen Vegetable Various Countries Pumpkin Butternut Individual Quick Frozen Vegetable Various Countries Spinach Individual Quick Frozen Vegetable Various Countries Spring Harvest Individual Quick Frozen Vegetable Various Countries Cauliflower Individual Quick Frozen Vegetable Various Countries Broccoli Individual Quick Frozen Vegetable Various Countries Edamame Individual Quick Frozen Vegetable Various Countries Chickpea-Garbanzos Fresh Organic Various Countries Green Beans Individual Quick Frozen Vegetable (Conventional) Various Countries Baby Carrot Individual Quick Frozen Vegetable (Conventional) Various Countries Carrot Diced Individual Quick Frozen Vegetable (Conventional) Various Countries Corn Supersweet Individual Quick Frozen Vegetable (Conventional) Various Countries Kale Individual Quick Frozen Vegetable (Conventional) Various Countries Green Peas Individual Quick Frozen Vegetable (Conventional) Various Countries Pumpkin Butternut Individual Quick Frozen Vegetable (Conventional) Various Countries Spinach Individual Quick Frozen Vegetable (Conventional) Various Countries Spring Harvest Individual Quick Frozen Vegetable (Conventional) Various Countries Cauliflower Individual Quick Frozen Vegetable (Conventional) Various Countries Broccoli Individual Quick Frozen Vegetable (Conventional) Various Countries Edamame Individual Quick Frozen Vegetable (Conventional) Various Countries Corn Fresh (Conventional) Various Countries Chickpea-Garbanzos Fresh (Conventional) Various Countries Black Fungus Individual Quick Frozen Vegetable (Conventional) Various Countries Bolletus Edulls Mushroom Individual Quick Frozen Vegetable (Conventional) Various Countries Champignon Mushroom Individual Quick Frozen Vegetable (Conventional) Various Countries Oyster Mushroom Individual Quick Frozen Vegetable (Conventional) Various Countries Shiitake Mushroom Individual Quick Frozen Vegetable (Conventional) Various Countries Durian Individual Quick Frozen Various Countries In reply, please be informed that Section 109 (1) (A) of the Tax Code, as amended by Republic Act No. 9337, provides for the exemption from VAT on the sale or importation of frozen fruits and vegetables. The aforesaid provision reads, viz. : "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 A) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor." "Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt shall be considered in their original state." Based on the above-cited provision, the importation and distribution/sale of agricultural products in their original state for human consumption, is considered exempt from 12% VAT pursuant to Section 109 (1) (A) of the Tax Code, as amended. Agricultural products are considered remaining in their original state even if these have undergone the simple process of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, or stripping. The type of processing is limited to the aforementioned simple processes. Otherwise, the same may no longer be considered agricultural product in its original state. Moreover, the VAT exemption is limited in application it refers only to such products which are intended as food for human consumption. In view of the foregoing, since frozen fruits and vegetables are basically an agricultural product in its original state and intended for human consumption, the importation and distribution/sale thereof by HEALTHY TOP HARVEST DISTRIBUTION, INC. is exempt from the twelve percent (12%) VAT pursuant to Section 109 (1) (A) of the Tax Code, as amended. It is understood that the importation of such product shall be covered by valid and existing authority to import issued by the Bureau of Plant Industry. However, products which undergo the processes which are by no means simple acts of preparation or preservation as the same already partake the nature of a full manufacturing process which transforms fruits, etc. into an entirely different form such as into purees or concentrate are not covered by Section 109 (1) (A) of the Tax Code, as amended. Such being the case, your request for exemption from VAT on the sale and/or importation of the below products is hereby denied and the sale and/or importation of the same is subject to twelve percent (12%) VAT imposed under Sections 106 (A) and 107 (A) of the Tax Code, as amended. Product Type Origin Acai Puree Individual Quick Frozen Fruit Puree Various Countries Avocado Puree Individual Quick Frozen Fruit Puree Various Countries Banana Puree Individual Quick Frozen Fruit Puree Various Countries Mango Puree Individual Quick Frozen Fruit Puree Various Countries Strawberry Puree Individual Quick Frozen Fruit Puree Various Countries Kiwi Puree Individual Quick Frozen Fruit Puree Various Countries Raspberry Puree Individual Quick Frozen Fruit Puree Various Countries 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