Implementing Rules and Regulations of Republic Act No. 10757

November 16, 2011 BIR RULING NO. 455-11 Sec. 108 (B) (2) of the Tax Code of 1997; BIR Ruling No. 021-88; BIR Ruling No. DA(VAT-020) 341-08 Centurian Biz Consultancy, Inc. Unit 10-D Strata 100 Building Emerald Avenue, Ortigas Centre Pasig City Attention: Ms. Sheryl April Shapit Gentlemen : This refers to your letter dated September 21, 2010 stating that Centurian Biz Consultancy, Inc. is a corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS201004149 dated March 17, 2010 with TIN 007-650-538; that it is organized primarily "To engage in and undertake the business of establishing, undertaking, organizing, conducting and managing business processing outsourcing and operations for accounting, bookkeeping, financial analysis, auditing, tax advisory and other consultancy services for overseas and international clients and other allied businesses, as well as any services and facilities incident thereto, and to lease and sublease any real or personal property, that shall be deemed necessary or convenient for the conduct of its business." that on April 3, 2010, Centurian Biz Consultancy, Inc. (CBC) entered into Agreements with Raffles Accounting Services (RAS) and Raffles Secretarial (RS); that RAS is in the business of accounting and business advisory based in Singapore with registered address at 120, Lower Delta Road #10-05 Cendex Centre Singapore 169208 with Company Registration No. 22346100L; that RAS, provides a complete range of outsourced business advisory, accounting and tax services and engaged CBC to provide back office data entry work for accounting and tax work; that on the other hand, RS is in the business of corporate secretarial and business advisory based in Singapore with Company Registration No. 53068435K; that RS engaged CBC to provide back office data entry work for payroll work; and that services rendered will be paid for in acceptable foreign currency. Based on the foregoing representations, you now request that services rendered to foreign clients and paid for in foreign currency are subject to VAT at zero percent pursuant to Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005. CDcaSA In reply thereto, please be informed that Section 108 (B) (2) of the Tax Code of 1997, as implemented by Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005, as amended, states that "(B) Transactions subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx "(2) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; xxx xxx xxx" In stressing the rationale of the above-cited provisions, this Office has elucidated the matter in BIR Ruling No. DA(VAT-020) 341-08 dated October 24, 2008, as follows: ". . . in order that the manning and crewing services of Imperial Scanship, Inc. be qualified for VAT zero-rating, they must meet two (2) requisites under RR 16-2005, namely: 1. The services must be rendered to persons engaged in business conducted outside the Philippines or to a non-resident foreign clients not engaged in business who are outside the Philippines when the services are performed; and 2. The fees must be paid to Imperial Scanship, Inc. are in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. Thus, the manning and crewing services that Imperial Scanship, Inc. renders to its clients may automatically qualify as VAT zero-rated transactions if said services are paid for in foreign currency and accounted for through our local banking system. Failing that the sale of said services will be regarded as subject to 12% VAT pursuant to Section 108 (A) of the Tax Code of 1997, as amended by R.A. 9337. In addition, to qualify Imperial Scanship, Inc.'s sale of services to its foreign clients as VAT zero-rated sales, Imperial Scanship, Inc. must be a VAT-registered taxpayer in accordance with Section 4.108-5 (b) of RR 16-2005." cDCaTS The view, expressed above, was a reiteration of BIR Ruling No. 021-88 dated February 2, 1988, where it was invariably held as follows: ". . . manning contract with the owners/managers of the vessels wherein you undertake to provide/supply the crew and personnel management requirements of a foreign-owned, but Philippine-flag vessels engaged in worldwide trade, you are deemed to have performed all of such services within the Philippines; hence, you are taxable under Section 102(a) of the Tax Code, as amended by Executive Order No. 273. If you are VAT-registered and the consideration paid to you is in acceptable foreign currency remitted inwardly and accounted for in accordance with the rules and regulations of the Central Bank, you are subject to the value-added tax of 0% pursuant to Section 102(a)(2) of the Tax Code, as amended by Executive Order No. 273. However, if you are not VAT-registered, or if the consideration for your services is not in acceptable foreign currency, you are subject to the value-added tax of 10% of your gross receipts pursuant to Section 102(a) of the same Code." Applying the afore-quoted provisions of law and the jurisprudential authorities cited above to the case under consideration, this Office holds that services rendered by CBC to its foreign principals and paid for in foreign currency will qualify for VAT zero rating pursuant to Section 108 (B) (2) of the Tax Code of 1997, as implemented by Section 4.108-5 (b) (2) of Revenue Regulations No. 16-2005, as amended. Provided, that the same is remitted inwardly and accounted for in accordance with the rules and regulations of the BSP. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue