Proposed Revisions to the IRR of RA 9295 (Domestic Shipping Development Act of 2004)

DOJ OPINION NO. 036 , s. 2010 July 26, 2010 Secretary Jose De Jesus Department of Transportation & Communications The Columbia Tower Brgy. Wack-Wack, Ortigas Ave. 1555 Mandaluyong City Dear Sec. De Jesus : This has reference to your predecessor's request for this Department's legal opinion relative to the proposed revisions to the existing Implementing Rules and Regulations (I.R.R.) of Republic Act (R.A.) No. 9295, otherwise known as the "Domestic Shipping Development Act of 2004". CSAcTa Specifically, the proposed revisions of the IRR relate to the grant of Value-Added Tax (VAT) exemption to the importation of cargo handling equipment and to the local purchase of passenger and/or cargo ships 150 GT and above, including engine and spare parts of the particular ships locally purchased. It is also proposed that, in the case of local purchase, if the exemption from payment of VAT is already availed of by the shipowners/operators, the ship builder can no longer be entitled to avail of such incentives. The proposed revisions are as follows: 1st proposed revision: "All MARINA registered domestic shipowners/operators shall be exempt from payment of VAT for the importation and local purchase of passenger and/or cargo ships 150 GT and above, including engine and spare parts of the particular ship(s) imported or locally purchased; . . ." (emphasis supplied) 2nd proposed revision: "All MARINA registered domestic shipowners/operators shall be exempt from payment of VAT for the Importation of Cargo Handling Equipment that are reasonably needed and to be used exclusively by the registered domestic shipowner/operator in its transport operations. However, in case of local purchase, if the exemption from the payment of VAT is availed of by the domestic shipowners/operators, the ship builder shall no longer be entitled to avail of such incentives." (emphasis supplied) You state that the exemption from payment of VAT for the local purchase of passenger and/or cargo ships 150 GT and above, including engine and spare parts of the particular ship(s) locally purchased, was not clearly indicated in the existing IRR. Also, you state that the importation of cargo handling equipment is not one of the types of importation expressly enumerated under Section 4, Chapter II of RA No. 9295, but it is proposed to be included as a VAT exempt transaction. In fact, under Rule III, Section 1.1.3 on Investment Incentives for Domestic Shipowners/Operators, the existing IRR already included the importation of cargo handling equipment that are reasonably needed, and are to be used exclusively by the registered domestic shipowner/operator in its transport operations, as among those exempted from VAT. SDEITC We regret that we have to decline rendition of a legal opinion on the above-stated proposed revisions in the IRR considering that its resolution inevitably requires the interpretation of the National Internal Revenue Code, as amended by the "Expanded Value-Added Tax Law", which is well within the province of the Bureau of Internal Revenue of the Department of Finance, which has been designated as the implementing agency of the aforesaid law. The proposed revisions, therefore, should have been posed to the Bureau of Internal Revenue for it involves a matter within its policy-sphere and jurisdiction. This time-honored policy is dictated not only by practical considerations but also by a sincere respect for the expertise on and familiarity with, the policies relating to the subject, and the rightful exercise of jurisdiction by a co-equal and coordinate government office (Secretary of Justice Op. No. 18, s. 1998, citing other opinions). Accordingly, we suggest that the matter relating to the above-stated revisions in the IRR be addressed at the first instance to the Department of Finance and/or the Bureau of Internal Revenue. Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary