BIR Ruling [UN-299-95]

August 14, 1995 BIR RULING [UN-299-95] Prime Machines Incorporated 79 EDSA Cor. 11th Jamboree St. Diliman, Quezon City Attention: Mr . Raul A . Fernandez General Manager Gentlemen : This refers to your letter dated February 6, 1995 stating that sometime in September, 1994 Mondragon Leisure and Resorts Corporation (MLRC), a duly registered Clark Special Economic Zone(CSEZ) Enterprise, rented from you a unit of D6D Crawler Tractor; that it used the said unit for Two Hundred Twenty-Four (224) hours; and that upon payment, it did not pay to you the 10% VAT, claiming that they are exempted from paying the said tax. Based on the foregoing representations and documents submitted, you are now requesting for a ruling as to whether or not MLRC should pay the 10% VAT on the rental of your tractor. In reply, please be informed that the lease of personal property by a domestic lessor in the customs territory to a registered enterprise operating within the Secured Area of the Zone shall be considered effectively zero-rated on the part of the lessor. The domestic lessor shall not impute or shift any VAT as part of cost to be paid by the lessee of its lease from the Customs Territory. Hence, the leasing of your D6D Crawler Tractor to MLRC, a registered Clark Special Economic Zone (CSEZ) enterprise operating within the Secured Area of the Zone is considered effectively zero-rated on your part, thereby preventing you from imputing or shifting any VAT as part of cost to be paid by MLRC as lessee. It should be understood however, that VAT registered domestic lessor in the Customs Territory shall apply for the effective zero-rating of their lease to CSEZ enterprises pursuant to Revenue Regulations No. 5-87.(BIR Ruling dated March 15, 1994) cdt Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)