Amigo Shipping Corporation

April 4, 2022 BIR RULING NO. VAT-127-2022 Section 109 (1) (T), Tax Code of 1997, as amended; RR No. 15-2015 Amigo Shipping Corporation Quarantine Rd., Brgy. Progreso Lapuz, Iloilo City Attention: Atty. Jamor O. Tremor Tax Manager Gentlemen : This refers to your request on behalf of Amigo Shipping Corporation , for a Certificate of Value-Added Tax (VAT) Exemption on its lease of one (1) Unit of a cargo vessel from Fortune Sea Carrier, Inc. , named "MV RENE," pursuant to Section 109 (1) (T) of the National Internal Revenue Code (Tax Code) of 1997, as amended. Documents submitted show that Amigo Shipping Corporation , with Taxpayer Identification No. 000-000-000-000, is a domestic corporation registered with the Securities and Exchange Commission (SEC) under Company Registration No. 58216; that it is duly accredited by the Maritime Industry Authority (MARINA) to engage in domestic shipping business per MARINA Certification dated July 8, 2019 valid until July 7, 2022; and that Amigo Shipping Corporation is leasing one (1) Unit of a cargo vessel from Fortune Sea Carrier, Inc. which is particularly described as follows: Vessel's Name: MV RENE Owner/Place of Business: Fortune Sea Carrier, Inc. R&A Building R. Palma St., Cebu City GRT/NRT: 199.28/118.96 Deadweight cargo carrying capacity in tons (about): 880dwt Indicated Horsepower: 600 BHP Class: Ocean Register of Shipping Type of Fuel: Automotive Diesel Fuel Speed Capability in Knots (about) or consumption in ton (about) of: Main Engine 8 knots at 80 liters/hour; Auxiliary Engine 0.4 liters/hour Present position: Cebu Period of Hire: January 2018 to 30 July 2018 Port of Delivery/Re-delivery: Ingore Port, Iloilo Trade Limits: Philippines/Domestic Trader Cargo Restrictions: Flour in 25kgs/Pollard in 40kgs/Fertilizer in 50kgs/Sugar in 50kgs/Wheat in Bulk/Soya in Bulk and that a Time Charter Agreement dated March 27, 2019 was executed by and between Amigo Shipping Corporation as lessee, and Fortune Sea Carrier, Inc. as owner-lessor. 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. (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 lease, 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, 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." In view of the foregoing, since "MV Rene" is a cargo vessel which was leased by Amigo Shipping Corporation for domestic transport of goods, the lease of the said vessel from Fortune Sea Carrier, Inc. shall be exempt from 12% VAT pursuant to Section 109 (1) (T) of the Tax Code of 1997, as amended. 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.