Montenegro Shipping Lines, Inc.

June 22, 2022 BIR RULING NO. VAT-302-2022 Section 109 (1) (T), NIRC; RR No. 15-2015; BIR Ruling No. 679-19 Montenegro Shipping Lines, Inc. Montenegro Corporate Center, along Diversion Road, Bolbok, Batangas City, 4200 Attention: AAA _______________ Gentlemen : This refers to your letter dated April 20, 2022, requesting on behalf of Montenegro Shipping Lines, Inc. , for a Certificate of Value-Added Tax (VAT) Exemption on its importation of one (1) Unit 2015 built 469 GT LCT Type Car/Ferry passenger vessel named " Nam Shin An Nong Hyup No. 5 ," 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 13, 2020 valid until July 21, 2023; that Montenegro Shipping Lines, Inc. is currently importing one (1) Unit 2015 built 469 GT LCT Type Car/Ferry passenger vessel which is particularly described as follows: Vessel's Name Nam Shin An Nong Hyup No. 5 Flag Korea Kind of Vessel LCT Type Car/Ferry Year Built 2015 Gross Tonnage 469 tons Dimension LOA 67.47 m Breadth 12.0m (Max 13.5 m) Depth 3.0 m Main Engine Yanmar 12AYM-WST 1400 PS X 1900 RPM X 2 Sets that MARINA has approved the importation of the above passenger vessel in its letter dated April 12, 2022 addressed to Montenegro Shipping Lines, Inc. ; that per Sworn Statement dated April 20, 2022 executed by AAA, __________ of Montenegro Shipping Lines, Inc. , the subject passenger 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. submitted the following documents: 1. Certified true copy 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. Memorandum of Agreement dated May 6, 2022, executed by and between Hong In Marine Co. Ltd. and Montenegro Shipping Lines, Inc.; and 6. Sworn Statement dated April 20, 2022. In reply, please be informed that Section 109 (1) (T) of the NIRC 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 passenger 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 "Nam Shin An Nong Hyup No. 5" is a 2015 built 469 GT LCT Type Car/Ferry passenger vessel 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 "Nam Shin An Nong Hyup No. 5" 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. 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.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Renumbered by Republic Act No. 10378.