RLS Shipping Lines

June 13, 2023 BIR RULING NO. VAT-077-2023 Section 109 (1) (T), NIRC; RR No. 15-2015; BIR RULING NO. 679-19 RLS Shipping Lines Mambajao (Pob.) City of Maasin Southern Leyte 6600 Attention: AAA _______________ Gentlemen : This refers to your letter, requesting on behalf of RLS Shipping Lines , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of one (1) Unit 2022-Built, 2281 GT deck cargo vessel named LCT "JOSIE FE 02" (ex: "QI YUE 27"), pursuant to Section 109 (1) (T) of the National Internal Revenue Code (Tax Code) of 1997, as amended. HTcADC Documents submitted show that RLS Shipping Lines , with Tax Identification No. ____________, is a company registered with the Department of Trade and Industry (DTI) under Company Registration No. ________; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in domestic shipping business per MARINA Certification dated September 21, 2021 valid until September 20, 2024; that RLS Shipping Lines is currently importing one (1) Unit 2022-Built, 2281 GT deck cargo vessel which is particularly described as follows: Ship's Name LCT JOSIE FE 02 Type of Vessel Deck Cargo Vessel Builder's Hull No. YY202202 Classification ZC GT/NT/DWT tonnage 2281t/1275t Moulded length 88.66M Moulded breadth 18.80M Moulded depth 4.88M Moulded draught 3.70M Number of decks 1 Number of masts 2 Number of funnels 2 Number of Propellers 2 Number of engines 2 Type of engine CW6200ZC-16 Engine maker Weichai Heavy Machinery Co., Ltd. Power 350kw x 2 Date keel laid May 17, 2022 Date launched October 13, 2022 that MARINA has approved the importation of the above cargo vessel in its letter dated January 24, 2023, addressed to Great Swiss Shipping Corporation for and on behalf of the buyer, RLS Shipping Lines ; that per Affidavit of Undertaking dated January 20, 2023 executed by AAA, __________ of RLS Shipping Lines , there is no available vessel in the local market and cannot be built/manufactured by the shipbuilder in the country due to its uniqueness and technical characteristics. CAIHTE In support of its request for exemption, RLS Shipping Lines submitted the following documents: 1. Certified true copy of the DTI Certificate of Business Name Registration; 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. Certified true copy of the International Tonnage Certificate; 6. Certified true copy of the Builder's Certificate; 7. Affidavit of Undertaking dated January 20, 2023. In reply, please be informed that Section 109 (1) (T) of the Tax Code of 1997, as amended, provides as follows: " Sec. 109. Exempt Transactions . xxx xxx xxx (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax. xxx xxx xxx (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 LCT "JOSIE FE 02" is a 2022-Built, 2281 GT deck cargo vessel and has been issued by MARINA with the required authority to be imported. Hence, the importation of the said vessel by RLS Shipping Lines is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by RLS Shipping Lines of LCT "JOSIE FE 02" 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 subject vessel. (BIR Ruling No. 679-19 dated November 13, 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.) ROMEO D. LUMAGUI, JR. Commissioner of Internal Revenue Footnotes 1. Renumbered by Republic Act No. 10378.